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Friday, March 31, 2023

Unilever Surmounts Covid-19 Headwinds, Returns to Profit

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Investors and analysts were not expecting the impressive performance by Unilever Nigeria Plc given the difficult business environment and the headwinds created by the coronavirus pandemic that disrupted economies across the globe.

The consumer goods giant pulled off a stunner as it posted N468.49 million profit in the fourth quarter (Q4) (October – December) to end the 2020 financial year, from a loss of N4.76 billion in Q4 2019.

Despite weak consumer purchasing power and high unemployment rate, sales surged by 84.33 percent to N16.83 billion in Q4 2020, thanks to higher average prices, low base from last year, and stronger volume outturn.

The company is spending less on input costs to produce each unit of product as cost of sales ratio dipped to 76.84 percent in the period under review from 132.15 percent the previous year.

While cost of sales increased by 7.03 percent, however, it is lower than the 15.33 percent inflation figures, according to data gathered by MoneyCentral.

“We expected a loss for the year, there was positive surprises in gross margin and the finance income line,” said analysts at Cordros Securities.

Gross profit margin moved  by 106.50 percent, as the growth rate in cost of goods are lower than revenue, indicative of higher cost absorption from improved sales, according to data gathered by MoneyCentral

The persistent pressure on consumer wallets and current macroeconomic challenges are downside risk to the industry, while weaker exchange rate, poor FX liquidity and rising inflation continue to impact input and fixed costs.

Nigeria’s economy contracted 6.1 percent in the second quarter as the combined impact of the prolonged lockdown to curb the spread of the coronavirus and the plunge in the price of oil, the country’s main export, took its toll.

The company’s shares closed at N13.20 as of 12:00 pm in Lagos, while the stock had declined by 23.1 percent over the last year.

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