• Thursday, May 23, 2024
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Unilever’s three-month earnings surge to 10-year high

Unilever’s three-month earnings surge to 10-year high

The earnings of Unilever Nigeria Plc, a fast-moving consumer goods firm, rose to the highest in at least 10 years, data compiled by BusinessDay shows.

Its latest financial statement shows that after-tax profit increased by 26 percent to N3.36 billion in the first quarter of this year from N2.67 billion in the same period of 2023.

Further analysis shows that the multinational recorded a revaluation gain of N1.18 billion, a recovery from the FX loss of N458.3 million in Q1 last year. Its finance income jumped to N1.99 billion from N236.39 million, driven mainly by exchange difference on bank balances of N1.64 billion and interest on call deposits and bank accounts of N364.15 million.

“The growth in earnings was driven by the higher net finance income outturn (N516.27 million vs net finance cost of N159.88 million in Q1 2023) and a lower effective tax rate of 23.0 percent,” analysts at Cordros Securities said in a note on Monday.

They said in the first quarter of this year, revenue increased by 57.8 percent year-on-year due to significant expansions in the food products, personal care, and the recently restructured beauty and wellbeing segments.

“We attribute the top-line expansion primarily to volume growth driven by the company’s penetration efforts, coupled with moderate price increases aimed at offsetting rising input costs.”

The firm incurred a finance cost of N1.48 billion from N396.3 million during the period. Its total assets rose to N126.1 billion from N116.3 billion during the period reviewed while total liabilities increased to N48.23 billion from N41.79 billion.

Net cash flow generated from operating activities stood at a negative of N16.73 billion from a positive N11.99 billion. Net cash flows from investing activities arrived at a negative of N93.48 million from a positive N11.31 million.

Net cash used in financing activities stood at a negative N1.48 billion from a negative N196.3 million.

Marketing and administrative expenses rose to N8.29 billion from N3.92 billion which is driven by brand and marketing which accounted for N4.01 billion, overheads which cost N3.37 billion, and royalties and service fees which cost N913.3 million.

“The 2024 brand and marketing is driven by media investment behind brands,” Unilever Nigeria said in a recent note.

The firm’s other income grew to N25.31 million from N22.65 million.

Analysts at Cordros Securities said, “We like that the company continues to deliver strong top-line growth despite the strain on consumers’ income. However, we remain cautious about the escalating cost pressures, which have hampered margin expansion in recent quarters.

“Looking ahead, we anticipate sustained revenue growth driven by higher volumes and sub-inflationary price increases. However, we foresee margin contraction due to cost pressures stemming from near-term foreign exchange constraints and inflationary impacts on operating expenses.

“Nonetheless, we still expect the company to remain profitable, buoyed by its strong topline and substantial cash reserves, providing a buffer to its earnings. Our estimates are under review,” they said.

The analysts expect new product offerings to be supportive of revenue growth in 2024. “However, details regarding whether these products will expand existing categories or target new markets remain undisclosed. All in, we forecast a 17 percent year-on-year revenue growth and an average growth of 11.8 percent over 2025 – 2028.

Unilever Plc is a British multinational fast-moving consumer goods company founded on 2 September 1929 following the merger of British soap maker Lever Brothers and Dutch margarine producer Margarine Unie. It is headquartered in London.