Unilever Nigeria, one of the players in the Fast-Moving Consumer Goods space has returned to profitability after a hard 2020 as improved sales helped boost profit.
Unilever made a profit of N714.7 million in the first half of 2021 compared to a loss of N519 million in the same time last year.
The firm’s sales grew to N39.1 billion, up by 43.2 percent from N27.3 billion in the first six months of 2020.
However, cost of sales jumped 38.3 percent to N29.2 billion in the first six months of 2021 compared to N21.1 billion in the same period last year. The increase in sales pushed up gross profit by 60.6 percent to N9.8 billion compared to N6.1 billion in the periods under review.
New worries for Unilever
The consumer goods firm came under pressure in the first half of 2020 as Nigerian consumers held back spending and adjusted their consumption patterns in the light of the coronavirus impact on their income.
Unilever Nigeria Plc manufactures and markets consumer products primarily in the home, personal care and foods categories. The Company sells products such as Omo washing powder, Key soap, Royco bouillon, Lipton tea, Blue Band margarine, Pears baby care goods, Vaseline petroleum jelly, Lux soap, and Close Up toothpaste.
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While the company seems to have returned back to profitability in the first half of 2020, the company’s performance was impacted by foreign exchange risk, credit risk and liquidity risk.
“Unilever is exposed to foreign exchange risk arising from various currency exposures. The currencies in which these transactions are primarily denominated are US dollars, Pound sterling, Euro and Rand. The currency risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate due to changes in foreign exchange rates,” the company said in its financial statement.
Exchange rate has risen from an average of N306/$ in 2018 to N411/$ in 2021. As the naira weakens against the dollar, imports become more expensive.
However, the Central Bank of Nigeria’s (CBN) attempt to defend the naira has created some difficulty in obtaining dollars, pushing most businesses to the parallel market where it is more costly to get dollars. Naira has weakened to N500/$1 in the parallel market, according to abokifx.com.
Although inflation has declined for three consecutive months, at 17.75 percent in June, Nigerians have no respite as their purchasing power has been squeezed.
Even with the recovery, Unilever is yet to reach its pre-pandemic levels. The firm grew profit by N5.51 billion in 2018 and N3.51 billion in 2019.
Further, analysis of the country’s financial statement shows that net finance income tumbled by 28 percent to N605 million from N844 million in the first half of 2020 driven largely by higher finance costs which rose by a whopping 790 percent to 45.4 million.
On the other hand, finance costs declined 23.4 percent to N650 million in the first six months of 2021.
Other highlights
Unilever saw a decline in impairment loss on trade receivables in N235 million in the first half of 2021 compared to N646 million in the same time last year.
The consumer goods maker spent more on selling and distribution as the expense rose by 34.4 percent to N1.68 billion compared to N1.25 billion in the same period last year. Also, marketing and promotion also jumped 36.4 percent to N7.79 billion from the previous year.
Unilever’s tax also rose 142 percent to N115.6 million, up from N47.6 million in the year before.
Earnings per share (EPS) grew 33 percent to N0.09 per share from N0.12 per share in June 2020.
In the three-month period (April-June), Unilever recorded a profit of N940 million compared to a loss of N1.51 billion in the same period last year.
During this period, the company grew sales by 35 percent to N19 billion, up from N14 billion in the same period of 2020.
