Unilever Nigeria Plc (UNILEVER) published its Q2-22 unaudited results last week Friday (July 15), reporting standalone EPS of NGN0.02 (Q2-21: NGN0.22), bringing H1-22 EPS to NGN0.33 (H1-21: NGN0.12). The EPS decline was due to the growth in finance costs (Q2-22: NGN507.47 million vs Q2-21: NGN11.09 million) for the period.
Q2-22 revenue grew by 42.3%, driven by substantial increases across the Food Products (+45.2% y/y | 44.9% of revenue) and the HPC (+40.0% y/y | 55.1% of revenue) segments. Experts highlight that revenue from the food segment bucked the trend from the last two quarters following the positive growth recorded in the quarter. We suspect price increases implemented across the company’s product portfolio drove the strong growth in both the Food Products and HPC segments. Sequentially, revenue grew by 13.1% on a q/q basis, following the broad-based increases across UNILEVER’s business segments – Food Products (+10.5% q/q) and HPC (+15.2% q/q).
Gross margin sustained its ascent from Q1-22, as it grew by 298bps to 30.2% (Q2-21: 27.3%), owing to the faster growth in the top-line (+42.3% y/y), which outpaced the increase in the cost of sales (+36.5% y/y). Consequently, EBITDA (+3bps) and EBIT (+232bps) margins settled higher at 6.8% and 4.1%, respectively, amid a 64bps expansion in OPEX margin.
Net finance cost came in at NGN335.02 million (vs net finance income of NGN452.78 million in Q2-21), reflective of the increase in finance cost to NGN507.47 million (vs Q2-21: NGN11.09 million) amid a 62.8% decline in finance income (Q2-22: NGN172.44 million vs Q2-21: NGN463.87 million). The increase in finance costs results from interest on third-party bank loans (Q2-22: NGN122.51 million | Q2-21: Nil) and exchange rate loss (Q2-22: NGN430.35 million | Q2-21: Nil).
Overall, PBT declined by 16.3% y/y to NGN628.28 million in Q2-22 (Q2-21: NGN750.69 million). Following a tax charge of NGN517.91 (vs NGN253.13 million tax credit in Q2-21), the company recorded a PAT of NGN110.37 million (Q2-21: NGN1.00 billion).
Comment: UNILEVER’s Q2-22 performance was below our expectations as the company’s sustained revenue and gross margin growth were inhibited by the dual impact of finance expenses and exchange rate loss on its bottom line. Considering the current FX illiquidity in the domestic economy which we assess may have a negative impact on the company’s operations, we believe earnings will remain under pressure in subsequent quarters. Our estimates are under review.
