Unilever Nigeria cuts operating loss significantly as revenue rises 1.3% to N61.6bn

By Charles Abuede

• Gross profit surged to N13.8bn, but with N3.05bn operating loss in FY20
• Growth was chiefly driven by food products

Unilever Nigeria Plc, a leading personal care and consumer goods company in Nigeria, saw a 1.3 per cent year on year increase in revenue from N60.8 billion to N61.6 billion in its fiscal year 2020.

The increase was driven by 8.8 per cent year-on-year growth in its food products, which was slightly offset by a 6.9 per cent revenue drop in the home and personal care segments.

The company, in its unaudited interim financial statements for the year ended December 2020 filed with the Nigerian Stock Exchange on Tuesday, disclosed that during the period under review it recorded a gross profit of N13.8 billion as against N6.7 billion in FY2019, while the operating loss for the period stood at N3.05 billion from N10.35 billion in 2019.

A breakdown of the financial results shows that the revenue increase corresponded with a year on year drop in the cost of sales by 11.6 per cent, resulting in a spectacular 11.4 percent points increase in gross margin to 22.4 per cent in the year 2020. The company further reported that it managed to control costs better in FY20 as the marketing and distribution expenses declined 1.7 per cent to N12.9 billion, whereas the selling and distribution expenses slumped 10.5 per cent year on year to N2.8 billion.

However, despite the somewhat lower net finance income, the company’s loss for the year 2020 retreated by 62.3 per cent year on year to N1.6 billion, motivated by the robust top-line growth and strong operating performance.  The company’s operating cash flows turned positive in 2020, owing to strong operating performance and better receivables management over the last two years.

A further lookat the quarterly performance,shows Unilever recorded a solid 84.4 per cent year on year growth in revenues in the last quarter of 2020 to N16.8 billion. On a quarter on quarter basis, the 3.2 per cent revenue decline was overshadowed by a 5.3 per cent decrease in the cost of sales to N12.9 billion, resulting in a 1.7 percentage points increase in gross margin to 23.1 per cent in the fourth quarter of last year. Also, the robust top-line performance permeated down to the operational level and the company reported a profit in the quarter, after two consecutive quarters of losses.

Unilever Nigeria recorded a quarter on quarter decline in its marketing and administrative expenses by 14.0 per cent to N3.4 billion, while the selling and distribution expenses were down 9.4 per cent to N745 million in 4Q 2020. The company further reported a net profit of N468 million in 4Q 2020 against a net loss of N1.5 billion in the Q3 of 2019. The EBITDA and net margin was 8.9 per cent and 2.8 per cent respectively in 4Q 2020 as against the negative margins of 3.3 per cent and 8.9 per cent in the prior quarter respectively.

Meanwhile, the company’s stratagem of initiating smaller packaging for price-sensitive consumers seem to be paying off as the food products segment continued to report strong numbers. An examination of the food product segment saw the company recording a quarter on quarter revenue decline by 2.2 per cent to N9.6 billion, while the home and personal products segments recorded a quarter on quarter revenue fall of 4.5 per cent to N7.2 billion in 4Q 2020. However, both the segments recorded an operating performance improvement with the food products segment operating loss slumping 86.7 per cent to N109 million from last quarter, with the home and personal care segment sinking 87.0 per cent to N82.0 million in 4Q 2020 from Q3 2020.