Unilever Nigeria Plc food business is responsible for the double digit growth in earnings of the maker of detergents and deodorants amid a currency restriction hurting the operations of companies in Africa’s largest economy.
The major driver is the food segment. The unit has seen a significant recovery largely driven by its Knorr seasoning chicken power,” according to Tajudeen Ibrahim, Head – Equity Research at Chapel Hill Denham.
“We were expecting recovery but the recovery was sooner than we expected. It is the largest low base effects and one will not expect the growth to truncate over the next three quarters,” said Ibrahim
For the first three months through March 2016, Unilever’s net income increased by 76.13 percent to N1.04 billion from N590.44 billion as at March 2014. Sales grew by 12.54 percent to N16.78 million as the company’s innovative products continue to bolster top lines.
While the company recorded double digit growth in revenue amid weak consumer discretionary spending, the currency restriction imposed by the apex bank is stifling the growth of consumer goods firms.
As a result of the capital controls imposed by the Central Bank, some companies are paying more than the official rate, a situation that is becoming unsustainable, unrealistic and unbearable.
Godwin Emefiele, with the backing of President Muahammadu Buhari, pegged the naira at 197-199 against the dollar through currency-trading and import restrictions that have deterred foreign investment and made it tough for manufacturers to buy inputs from abroad.
Further analysis of the financial statement of Unilever showed net margin, a measure of profitability of efficiency, increased to 6.19 percent in 2016 from 3.96 percent in 2015. Gross profits were up by 18.81 percent to N6.0 billion, which means the company is efficient in managing director costs attributable to projects.
Analysts also attribute the upward trajectory in Unilever’s profit to its ability to reduce the debt in its capital structure. Finance costs reduced by 33.60 percent to N554.13 billion.
“There were able to refinance or manage debt that bolstered bottom lines, said Saheed Bashir, head finance and operation at Meristem Securities Limited.
The Nigeria maker of soap recorded a 9.18 percent rise in cost of sales to N10.75 billion, lower than the 12.80 percent March inflation figure. Operating expenses were up by 18.40 percent to N4.12 billion.
Experts are calling on the central bank to relax some of its monetary policies as it is stifling growth of consumer goods firms.
“It would be very insane to continue like this for months and months,” Unilever’s Africa President Bruno Witvoet said in an interview on Monday at a conference in Abidjan, Ivory Coast’s commercial capital. Clarity on what the “right rate” is would help businesses “make more sensible decisions,” he said.
Unilever’s share price increased by 1.04 percent to N29.54 2:45 pm, on the floor of the exchange while market capitalization stood at N110.66 billion.
BALA AUGIE
