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Tuesday, March 28, 2023

Unilever Nigeria Tea Business Separation to Lead to Revenue Loss

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Following the announcement by its parent company to separate its global tea business, as part of a strategic review, the Management of Unilever Nigeria Plc. (UNILEVER) yesterday, via a letter to the NSE informed the investing public of the ongoing process which it expects to conclude by the end of 2021.

Analysts say that while the FMCG giant is focused on streamlining its business interests with a view to optimizing value, its decisions have had unintended consequences, particularly on its Nigerian subsidiary.

Recall that the company had towed a similar line with its spreads business, first separating and subsequently selling it off in 2018 – a move that resulted in a 34.89% drop in revenue for Unilever Nigeria in 2019FY (as against prior years of consecutive growth) and an after tax loss of NGN7.42bn.

Revenue has not recovered to previous levels since the divestment.

In the event that the company does eventually sell off its tea business, Unilever Nigeria’s food portfolio which is responsible for about half of the company’s revenues (contributing 56.10% of total revenue as at 9M:2020 and 5-year average contribution of 50.06%) would be reduced to just two seasoning brands: Knorr and Royco.

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