Unilever Nigeria Plc slid to a N519.33 million loss in the second quarter after sales fell because of restriction on credit sales and loss of patronage due to the lockdown imposed by government to curb coronavirus.
The after tax loss is the first in more than five years as the consumer goods giant’s products are not essential items and are susceptible to competition especially in the lockdown periods between April to May.
That’s on top of a weak consumer purchasing power squeezing consumer wallets and undermining sales.
During the first quarter conference call, the management of Unilever said the current foreign currency situation is similar to the 2015-2017 crises and that it currently faces challenges sourcing foreign exchange from the apex bank’s official windows.
Total expenses (cost of sales and operating expenses) have eclipsed revenue, which led to an operating loss of N1.41 billion as at June 2020.
The company is not efficient in generating profit for every dollar of cost involved in generating revenue.
Gross profit slumped by 45.76 percent N6.15 billion.
However, cost of sales dipped by 29.34 percent to N11.27 billion in the period under review, largely due to the impact of weaker production activity.
While the company had tapped the equity market four years ago to raise capital via rights issue to reduce the debt in its capital structure, raising capital to fund future expansion plans amid operating losses could be a herculean task.
In 2018, Unilever opened a $12 million Blue Band margarine factory in Nigeria’s southwestern state of Ogun so that it does not have to import margarine from Ghana, as it has in recent years.
The company has cut back on capital expenditure plans in recent times due to tepid economic activities.
The purchase of property plant and equipment in the cash flow statement reduced by 84.23 percent to N427.16 million in June 2020 as against N2.71 billion the previous year.
The company’s shares closed at N12.85 as of 2:00 pm in Lagos, valuing it at N71.81 billion.