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Tuesday, March 28, 2023

Unilever Nigeria Returns to Profit on Strong Consumption Resilience

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Consumer goods maker Unilever Nigeria Plc has returned to the path of profitability, thanks to strong consumption resilience as the company continues to refocus on its portfolio.

The company posted profit after tax of N1.08 billion in September 2021 from a loss of N2.0 billion as at September 2020.

Despite inflationary pressures, foreign currency scarcity, and currency volatility, the company is able to spend less on input cost to produce each unit of product as it turns each money invested in sales into higher profit.

Cost of sales ratio reduced to 72.98 percent in September 2021 from 77.90 percent the previous year. Operating profit margin rose to 1.15 percent in the period under review from (6.39 percent the previous year.

It managed direct costs attributable to projects as gross profit margin was up 27.02 percent in September 2021 from 22.10 percent the previous year.

Analysts say Unilever benefitted from full reopening of economic activities which boosted the household income and restored business and investment activities to near pre-pandemic level.

Beyond our expectation, the Nigerian economy grew by 5.01% year on year (yoy) in the second quarter of 2021, according to data from the National Bureau of Statistics (NBS).

While the economy in Sub-Saharan Africa is already set to grow by 3.7% this year, the International Monetary Fund (IMF) has projected a further 3.8% growth come 2022.

Unilever’s revenue growth was strengthened by price hikes in key products as companies passed on rising costs to consumers in the form of higher prices.

Revenues were up 31.12 percent to N58.72 billion as at September 2021, but the top line is lower than 2018’s N72.30 billion, before the coronavirus pandemic disrupted businesses activities across the globe and pummeled down crude oil price.

The company is struggling with a severe dollar scarcity and decrepit infrastructure which are roadblocks to strong margins and higher returns to shareholders in the form of bumper dividend and share appreciation.

Unilever Global (parent company of Unilever Nigeria) has pushed up prices of its products by more than 4 percent in the third quarter as global consumer goods companies battle rising inflation fueled by reopening of the economy and supply chain constraint.

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