Recently at the Nigerian Stock Exchange (NSE), Unilever Nigeria plc released its first-quarter (Q1) to March 31, 2016 results to investors and shareholders.
The Q1 results
The company’s Q1 revenue grow by 12.6percent to N16.782billion from N14.910billion in Q1’15. Its gross profit also rose to N6.032billion from N5.061billion in Q1’15, up 19.2percent.
The company also reported 33.3 percent decline in financial costs to N545million, from N817million in Q1’15, down by 33.3percent.
Profit Before Tax (PBT) rose to N1.419billion from Q1’15 level of N864million, up by 64.2percent, while Profit After Tax rose remarkably by 76.4percent to N1.041billion from N590million in Q1’2015.
About the company
Listed under the personal/household products subsector of consumer goods sector at the Nigerian bourse, Unilever Nigeria plc has a market capitalisation of N110.661billion and its shares outstanding stood at 3,783,296,250 units. Its share price as at Tuesday was N29.25kobo.
No matter who you are, or where in the country you are, the chances are that Unilever products are a familiar part of your daily routine. Unilever is a manufacturer of some of the world’s leading foods, home and personal care products such as Blue band and flora margarines, Knorr and Royco, Ice cream, Lipton tea; and Omo; Lux, Dove, Lifebouy, Geisha and Sunlight soaps; Vaseline, Lady gay; Close up tooth paste.
Founded in 1930 out of a merger between Lever Brothers (UK) and Uni-margarine (Netherlands) which existed in the 19th Century, Unilever (Uni+Lever) is today one of the world’s leading Fast Moving Consumer Goods (FMCG) company with a turnover of more than 4.3 billion Euros. Unilever operates in 100 countries including Nigeria.
Analysts comment on Unilever Q1 results
“In addition to the strong sales growth, the PBT increase was also driven by a 200bp y/y gross margin expansion to 36% and a -36% y/y decline in net finance charges. We attribute the softer net finance charges to a c.30% decline in short term loans and borrowing over the January to March period. These positives more than offset an 18% y/y increase in operating expenses,” said Jumoke Okeowo team of analysts at FBNQuest.
“Compared with our unrevised estimates (since the better-than-expected Q4 2015 were published), sales came in 19% ahead while PBT and PAT were significantly stronger. The wide variance was due to the better-than-expected sales growth as well as net finance charges coming in 35% softer than what we forecast. Unilever management has not guided the market on their outlook for some time, hence the wide disparity between our forecasts (and consensus) and the actual reported figures. However, the company released a statement last month stating that it plans to source up to 90% of its raw materials locally. It appears this strategy may have started paying off. Q1 2016 gross margin expanded by 200bps y/y,” FBNQuest analysts further stated.
Though they further noted that year to date (ytd), Unilever shares have shed -32.4%, underperforming the NSE ASI which has shed -13.9%. “Given the second consecutive positive set of results from the company, consensus is likely to cautiously raise its estimates. Although we continue to believe that consumer goods names with a significant exposure to non-food, such as Unilever, are likely to face greater challenges, it appears that the company may have started making some adjustments to soften the negative impact of the macro challenges which are still being felt. We hope to obtain some comments/clarification from management on this. We rate the stock Underperform. Our estimates are under review”, FBNQuest analysts added.
Pabina Yinkere-led team of equity analyst at Vetiva Capital Management Limited said, “Whilst Q1 performance showed improvement across lines, we think the operating environment remains challenging amidst tight consumer wallets and rising cost. We choose to adopt a cautious approach and would like to see the sustenance of sales trend of the past two quarters before making marked changes to our estimates. Thus, we maintain our FY’16 sales estimate at N62 billion but raise our EPS forecast to N0.69 (Previous: N0.60) after adjusting for lower marketing and finance costs. Consequently, our 12- month target price is also revised slightly upwards to N16.25 (Previous: N15.75)”.
According to Vetiva analysts, “We believe Unilever would have benefitted from intense promotional campaigns and investments in route to market in the past year. Furthermore, we think a mix of price increases and some volume growth would have contributed significantly to this performance, noting that consumer goods companies will seek to pass on increased costs”.
