Last week at the Nigerian Stock Exchange (NSE), Unilever Nigeria plc released its audited financial statement for the year ended December 31, 2014.
The company’s statement of comprehensive income shows 7 percent decline in revenue to N55.754 billion from N60.004 billion in 2013. Unilever Nigeria recorded 58 percent decline in profit before tax (PBT) to N2.873 billion as against N6.793 billion in the full-year 2013.
Likewise, profit after tax (PAT) dropped by 49 percent to N2.412 billion from 2013 level of N4.724 billion. The implication of Unilever’s dismal outing last year is likely cuts to analysts’ consensus estimates. Both the company’s sales and PBT came in weaker than analysts expected.
Unilever (parent) makes and sells products under more than 400 brand names worldwide. About 2 billion people use them on any given day.
The long-term success of the company stems from the strong relationship with its consumers based on the deep roots in the local cultures and markets.
The company’s brands are household favourites and this is because they show commitment to meet the everyday needs of people everywhere in Nigeria.
Olajumoke Okeowo and Uwadiae Osadiaye, both analysts at FBN Capital Limited, in their first reaction to Unilever Nigeria’ full-year results, noted that Nigerian consumer goods names were still experiencing a challenging time given the insecurity in Northern Nigeria, competition in Southern markets and continued pressure on consumer spending.
“Unilever introduced Rexona and Pepsodent into the Nigerian market in the first half (H1) of the year. We believe this led to high marketing costs initially, but suspect that the company may be easing off on this, given the deteriorating macro environment,” the analysts said.
Further look at Unilever Nigeria’s financial statement shows basic earnings per share (EPS) declined by 49 percent to N0.64 from N1.25 in 2013.
Unilever, which is listed under the personal/household products subsector of the consumer goods sector at the NSE, has a market capitalisation of about N159 billion.
As of the beginning of trading this week, Unilever’s share price closed at N42.20 from N39.35 the preceding trading day (Friday). Year-to-date (Ytd), Unilever shares have outperformed the NSE ASI which still shows a high negative return.
“We still find the shares relatively expensive. Unilever declared a dividend per share of 10 kobo which implies a dividend yield of 0.3 percent and a payout ratio of 13 percent. Consensus was looking for dividend per share of N0.76 (we forecasted N0.64 estimate),” the FBN Capital analysts said.
Ahead of the released financials at the NSE, the parent company of Unilever indicated its intention to acquire via a tender offer up to 944,465,532 shares (about 25% of total shares outstanding) of Unilever Nigeria at a price of N45.50. This would increase its stake in Unilever Nigeria to 75 percent. At the NSE, the outstanding shares of Unilever is 3,783,296,250.
Though, the terms of the proposal are subject to change, analysts believe that the tender price represents a premium compared with its share price as of the time of the tender offer.
“This appears quite expensive relative to its peers under our coverage universe and suggests the extent to which the parent company is willing to go to gain more control of its Nigerian unit. As such, even though we continue to find valuation expensive in both absolute and relative terms, we acknowledge that the tender offer is likely to give support to the stock,” FBN Capital analyst further said.
Iheanyi Nwachukwu
