Shares of FMCG Unilever on Friday plunged by nearly the most allowable in a day after the company announced it made an annual loss for the first time in over five years.
Unilever shares declined by 9.77 percent to N17.55 in Friday’s trade, the most since November last year, as negative investors sentiment weighed on the consumer goods maker so that it emerged the worst performing on the Nigerian Stock Exchange (NSE) in the trading session. lagos bourse gained 0.13 percent Friday.
Unilever had published its unaudited full-year result which showed a loss of N4.22bn compared to a profit of N10.03bn in 2018.
On a quarterly basis, sales fell by about 58 percent in Q4 while loss stood at N4.765bn, a result Unilever said reflects challenging trading conditions and its decision in Q3 to prioritize tightening of credit terms and minimize exposures on trade receivables.
‘‘The adverse impact on revenue was expected to spill over into subsequent quarters. Management retains a positive outlook for the business in the long term,’’ Unilever said.
The loss in 2019 full-year was preceded by three years of decelerating bottom-line growth which had seen Unilever grow by an average of 112 percent a year.
Profit fell following a 34 percent decline in the sales, the unaudited company result showed.
The top- consumer brand said it raked N60.758 billion in revenue last year, a value which is the lowest level since it made N59.221 billion in 2015.
The performance put peak revenue in the last five years at N92.026 billion in 2018, while peak revenue growth is 22 percent in 2017.
The real growth of the consumer goods sector, measured by Food, Beverage and Tobacco GDP picked up in the third quarter of 2019 to 2.98 percent compared to the broad economy expansion of 2.28 percent in the quarter, as improving economy and the border closure supported players in the space.
While growth in the economy has remained at an upward trajectory, population expansion faster than GDP meant income per head in Nigeria was not growing.
The third quarter of 2019 also saw inflation reverse pattern after it had steadily declined from 11.4 percent in May to 2019 year low of 11.02 percent in August.
The rate of increase in price level continued to accelerate till it reached 11.98 percent in December owing majorly to the border closure and the festive season.
The effect of low GDP per head and rising inflation was that consumer purchasing power remained weak-if not eroding- with a negative impact on demand for company sales.
Cash- strapped Nigerians have resorted to cheaper alternatives favouring unlisted brands over listed peers, and causing the latter much headache since the 2016 recession worsened income levels.
A report by Coronation Merchant Bank last year explained the shift in preference of Nigerian consumers, many of whom live below $ 2 a day, towards cheaper brands.
The effect of this price sensitivity has been a decline in sales of the ‘big’ brands and has forced some players across sub-sectors of the consumer goods industry to repackage their products to smaller sizes that can be sold at cheaper rates.
For Unilever, the availability of cheap alternatives to its Home & Personal Care segment (HPC) and intense competition in the Food Business space continues to dampen sales.
Unilever’s Home & Personal Care includes the sale of skincare and oral care products, fabric care and household cleaning while Food segment includes the sale of tea, savoury and spreads.
In 2019, HCP segment revenue declined by 40 percent compared to 28 percent fall in the Food Product segment.
The underperformance brought the contribution of HCP to total revenue to 47 percent, making last year the first time since 2016 HCP is not the major cash spinner for Unilever.
The 2019 result means Carl Cruz, Unilever’s new Managing Director has his work cut out for him when his appointment takes effect 1, February 2020.
The Board of Unilever Nigeria had earlier in January announced the appointment of Carl Cruz as its new Managing Director, according to a statement by Soromidayo George, Director, Corporate Affairs & Sustainable Business, Unilever, Ghana & Nigeria.
Carl who has extensive career in Unilever D & E Markets in Asia (Philippines, Thailand, India and Sri Lanka) until the appointment served as Chairman, Unilever Sri Lanka and boasts of over 26 years’ experience working in Customer Development, and in Marketing roles across Home Care, Beauty & Personal Care and Foods.
As Chairman of Unilever Sri Lanka, Carl successfully steered the business to a sustainable and competitive growth trajectory, Unilever said in the note published by NSE.
Meanwhile, Cruz has expressed optimism about his new challenge steering Unilever in Nigeria.
According to him, “Nigeria is an important market with exciting opportunities. Unilever Nigeria has a great team and our ambition is to satisfy consumers’ needs and make sustainable living commonplace.’’
Unilever’s unaudited report for 2019 showed that revenue (N60.76bn) declined by 34 percent compared to a 16 percent drop in the cost of sales (N54.09bn).
This resulted in gross profit paring by 76 percent with Unilever earning N11 from every N100 sales in 2019 compared to N30 per hundred naira sales.
Selling and distribution expenses plunged 26 percent in the period, marketing expenses eased by 10 percent while impairment loss on trade receivable surged 132 percent.
A big decline in other income resulted in an operating loss of N10.35bn compared to an operating profit of N10.453bn in the preceding year.
Net finance income also shrunk on the heels of a 20 percent drop in finance income to N2.86bn while finance cost rose by 82 percent to N824m.
Unilever recorded a loss before tax of N8.32bn compared to a pre-tax profit of N13.56bn in 2018.
Information from the company’s financials suggests a tax credit of N4bn which improved bottom-line to a loss of N4.22bn.
Earnings per share (EPS) of loss of N0.74 compared to N1.77.
The total asset of Unilever declined 18 percent year-onyear to N107bn in 2019 while total liabilities fell 23 percent to N37.6bn resulting in a 16 percent reduction in total equity at about N70bn.
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.
