Unilever leveraged on improvements across key lines, expansion in margins
UNILEVER published its Q1-22 unaudited results on Friday (22 April), reporting EPS of NGN0.31 (vs loss per share of NGN0.09 in Q1-21). The positive outturn in EPS was underpinned by improvements across its key lines and expansion in margins.
Q1-22 revenue was higher by 24.5% y/y, primarily driven by the HPC segment (+23.2% y/y | 54.1% of revenue). In our view, the higher top-line figure emanated from the company’s reinvestment in tier 3 and 4 brands to drive volume growth in the HPC segment. In addition, we believe the investment in its distribution network in 2021FY provided another layer of support to the volume expansion. Elsewhere, revenue from the Food Products segment (-9.2% y/y | 45.9% of revenue) sustained its descent, as UNILEVER’s market share in the seasonings market weakened in the period. However, on a quarterly basis, revenue declined by 1.4% q/q, following broad-based declines across UNILEVER’s business segments – Food Products (-1.5% q/q) and HPC (-1.3% q/q).
Gross margin expanded to 34.9% in Q1-22 (Q1-21: 25.3%), owing to the faster growth in the top-line (+24.5% y/y), which outpaced the increase in the cost of sales (+8.6% y/y). Consequently, operating profit turned positive as it printed NGN2.19 billion (vs operating loss of NGN282.40 million in Q1-21) despite a 13.5% increase in operating expenses. On the latter, we highlight that the OPEX-to-sales ratio declined by 239bps y/y to 24.6%, reflecting improved operational efficiencies. Accordingly, the EBITDA margin increased by 11.47 ppts to 13.7%, and the EBIT margin turned positive as it printed 10.6%.
Net finance income came in at NGN162.93 million (vs NGN152.42 million in Q1-21), on the back of higher finance income from a sizeable cash balance (NGN60.84 billion). We highlight that finance costs increased markedly to NGN121.13 billion (NGN34.37 billion) on exchange difference on bank accounts (Q1-22: NGN83.27 billion | Q1-21: Nil)
Overall, the company recorded a PBT of NGN2.35 billion in Q1-22 (vs Loss Before Tax of NGN129.98 million in Q1-21). Following a tax expense of NGN554.24 million, the company recorded a PAT of NGN1.80 billion (vs Loss After Tax of NGN573.89 million in Q1-21).
Industry pundits say UNILEVER’s Q1-22 performance is impressive given the magnitude of revenue growth and gross margin expansion that the company was able to deliver in the period.
