Unilever Nigeria, a manufacturing consumer goods firm, has seen a continuous trend in its increased costs of sales driven by inflation that has caused prices of raw materials to skyrocket.
The firm’s cost of sales surged to N94.03 billion in 2024 from N72.01 billion in 2023 while in Q4, cost increased to N33.01 billion from N23.9 billion.
“On the cost side, inflationary pressures and higher raw material prices drove a 30.6 percent year-on-year increase in the cost of sales to N94.02 billion,” CardinalStone Securities analysts said.
In comparison with peers, Cadbury Nigeria also recorded growth in cost of sales to N111.7 billion from N63.04 billion.
“Unilever’s return metrics also strengthened, with improvements across both return on equity (ROE) and return on assets (ROA), reflecting its enhanced profitability and operational efficiency,” analysts CardinalStone Securities stated.
After-tax profit increased to N15.9 billion in 2024 from N8.44 billion while Revenue also increased to N149.8 billion from N103.9 billion.
Unilever Nigeria’s share price increased to N38 as of Jan 30 from N36 at the beginning of the year. The firm has a share outstanding of 5.75 billion.
Cash and cash equivalents increased to N68.8 billion driven by cash at the bank and in hand worth N41.6 billion and fixed deposit worth N27.2 billion.
Brand and marketing expenses surged to N14.7 billion from N7.4 billion driven by media expenses for personal care and food products.
“The 2024 brand and marketing expenses are driven by an increase in media expenses for personal care and foods products categories to support various projects and campaigns. Costs also include investment across brands to improve product visibility in trade,” Unilever Nigeria said.
“In previous years, Unilever Nigeria Plc had agreements with Unilever Plc United Kingdom for Technology and TradeMark licenses. In consideration of this, a royalty of 2 percent of net sales value and 0.5 percent of net sales value was payable by Unilever Nigeria Plc to Unilever Plc, the United Kingdom for Technology and Trade Mark licenses respectively.
“Effective February 2023, the exclusive intellectual property (IP) rights for Trademark and Technology licenses, previously held by Unilever Plc, are now vested in Unilever Global IP Limited and Unilever IP Holdings B.V. The amount payable as Technology and Trademark Licence fees for 2024 are N4.1 billion,” it stated.
Read also: Full Year 2024 Unaudited Report: Unilever Nigeria records 44% growth in Turnover
Overheads surged to N11.27 billion from N4.45 billion driven by the impact of naira devaluation on foreign-denominated obligations.
“The 2024 overheads are driven by the impact of naira devaluation on foreign-denominated obligations, investment in capability development and general inflation on goods and services,” the firm stated.
Deposit for imports grew to N7.9 billion in 2024 from N1.5 billion in 2023.
Finance income grew to N7.16 billion driven by interest on call deposits and bank accounts which contributed N3.67 billion, exchange difference on bank balances which contributed N3.44 billion, and interest income on lease receivables which contributed N56.3 million.
On March 17, 2023, Unilever Nigeria Plc announced its intention to exit the Home care business categories in Nigeria and the company exited home care business category in September 2023.
All production of Home Care products ceased in June 2023 and sales ceased in September 2023, following a strategic decision to place greater focus on the company’s margin accretive products.
“The home care segment does not meet the requirement for a disposal group or held for sale, as the assets were not sold but leased out. However, it represents a separate major line of business and has been reported as a discontinued operation,” the firm said in a note.
The firm’s sale of finished goods to related parties increased to N3.89 billion from N2.7 billion driven by Unilever Cote D’Ivoire Limited with N3.8 billion, Unilever Asia Private Limited (N55.9 million) and Unilever Ghana Limited (N24.7 billion).
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