Unilever Nigeria, one of the players in fast moving consumer goods space and a subsidiary of Unilever Overseas Holding B.V, posted a loss of N2.06 billion in the nine months period of 2020, compared to a profit of N540.7 billion same period last year. That ’s its first nine months loss in nine years, according to data compiled by Businessday.
The consumer goods firms has been swimming in loss since Q3 2019 to Q3 2020 with the exception of Q1 2020. On a quarterly basis, the company recorded a loss amounting to N4.76 billion, N7.42 billion and N1.63 billion in Q3’ 19, Q4’ 19, Q2’20 and Q3’20 respectively whereas in Q1 2020, it recorded a profit of N1.1 billion.
Yinka Ademuwagun, a research analyst at United Capital Plc said the problem of Unilever started when the company decided to tighten credit terms to reduce the number of consumers who purchase on credit. This reluctance by the firm to engage in credit sales so as to avoid bad debt was met with weaker production demand on the back of already dwindling consumer income and lower purchasing power worsened by the pandemic, according to Ademuwagu. “Also, reduced commodity prices contributed to lower cost of sales and revenue”, Ademuwagun noted Analysis of the firms nine months financial show that revenue reduced by 13 percent to N44.7 billion from N51.6 billion while cost of sales fell at a faster rate of 17 percent to N34.85 billion in 2020 from N41.9 billion in 2019. Upon closer look at Unilever financials, impairment loss on trade receivables skyrocketed by 239.6 percent to N1.08 billion from N316.8 million for the same period of 2019.
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Ayorinde Akinloye, a research analyst at CSL Stockbrokers stated the faster year-on-year decline in cost of sales relative to revenue reflects lower commodity costs despite pressure from the naira devaluation which affected the cost of importing key raw materials
Analysis of the country’s financial statement show that net finance income tumbled by 81.5 percent to N300 million from N1.4 billion in nine months 2019 driven largely by weaker finance income which fell by 69.7 percent to N600 million. On the other hand, finance costs declined by 32.1 percent to N300.8 million in 9M 2020 from N4.4 million in 9M 2019.
The decline in finance income was driven by lower fixed deposit investments which was down by 44.5 percent to N8.4bn, as well as the depressed yield seen in the fixed income space Administrative expenses rose by 27 percent to N9.6 billion in 2020 from N7.6 billion in 2019 on a 9-month basis.
However, selling and distribution cost reduced by 18.7 percent to N2.08 billion in the first nine months of 2020 from N2.5 billion in the same period of 2019. When all expenses were combined, operating cost was seen to plunge by 277 percent to N2.86 billion in 2020 from N0.76 billion in 2019 on a 9-month basis.
Despite the persistent loss incurred by Unilever in each quarter since Q3 2019, the third quarter of this year saw a slight improvement of 5.6 percent to N-1.54 billion from -N1.63 billion in Q2 2020, signalling a slight beacon of hope and optimism for the future of one of Nigeria’s leading consumer goods industry.
This optimism is buttressed by the fact that gross profit actually marginally increased by 2.6 percent to N9.88 billion in 2020 fromN9.63 billion in 2019 on a 9-month basis. Compared to last quarter, gross profit also increased by a much higher 36 percent to N3.7 billion in Q3 2020 from N2.7 billion in Q2 2020.
This improvement is further evidenced by the fact that revenue outpaced cost by 24 percent to N17.4 billion in Q3 2020 from N14 billion in Q2 2020 whereas cost grew by 21 percent to N13.67 billion from N11.28 billion within this period. More striking is the fact that this improved performance was more evident when comparing the third quarter on a yearly basis.
Net profit substantially improved by 48.7 percent to -N1.54 billion in Q3 2020 when compared with -N3 billion in Q3 2019 and PBT gained 50 percent momentum to -N2 billion from N4 billion within this period. Notwithstanding the cost increase by 28 percent to N13.67 billion in Q3 2020 from N10.68 billion in Q3 2019, revenue almost doubled with 94 percent growth to N17.4 billion from N8.97 billion in the same period further revealing the possibility of Unilever performing better in the near future.
