Company Analysis

Unilever Nigeria records N7.45bn profit after tax in 2017


Unilever Nigeria lifted after tax profit by over 142% to N7.45 billion in 2017, maintaining triple digit profit leap for the second year after a 158% rebound gave the conglomerate a new growth momentum in 2016. This is a new profit high for the company since it lost nearly one-half of after tax profit in 2014.
For the first time in five years, the company has beaten the peak profit figure of N5.6 billion it posted in 2012. Unilever lost profit in each of the three years that followed until the rebound in 2016.
Earnings growth gained speed all through in 2017 with the final quarter contributing 35% of the profit for the year. Accelerating growth in sales revenue is a key factor in the company’s strong profit growth over the past two years. Sales revenue accelerated from below 18% in 2016 to 30% in 2017, closing the year with a turnover of N90.77 billion. This is only 2.4% short of our projected full year sales revenue figure of N93 billion for the company.
The company’s sales are generated from two broad market segments – food products and home and personal care. The growth driver in 2017 was home and personal care segment, which grew sales revenue by 43.5% to become the leading revenue line. Food products category was the dominant revenue line for the company in the prior year, contributing 52% of sales in the year.
Unilever’s closing after tax profit of N7.45 billion is only slightly ahead of our projected figure of N6.8 billion. The performance confirms a new trend for the company after a three-year falling trend in profit ended in 2015.
The improved profit capacity reflects accelerating sales revenue as well as a considerable improvement in the cost-income relationship. Cost of sales moderated at 68% of sales revenue in 2017 compared to 71% in the preceding year. That raised gross profit well ahead of sales revenue at 42.6% to N28.94 billion at the end of 2017.
Selling/distribution expenses also claimed a reduced share of sales revenue while marketing/administrative expenses increased only marginally, providing a major cost saving channel for the company. The cost savings paved the way for a 123% jump in operating profit to N12.95 billion at the end of the year.
Finance costs grew sharply by 25% to N3.41 billion but an increase of 63% in finance income lowered an increase in net finance cost to 2.5%. The company therefore achieved an all round cost moderation in 2017, which enhanced profit capacity and stretched out profit margin. Net profit margin improved from 4.4% in 2016 to 8.2% at the end of 2017 – a continuing improvement from 2% in 2015.
The company earned N1.78 per share at the end of 2017 compared to 81 kobo in the preceding year. The board of directors has earlier disclosed its decision to declare a dividend, details of which were yet to be announced at press time. The company paid a cash dividend of 10 kobo per share for the 2016 operations.

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