Amid the current FX illiquidity and the impact of finance expenses on its bottom line, Unilever Nigeria Plc has announced that its Profit After Tax (PAT) rose from N714.8 million to N1.91 billion in the first six months of 2022.
The company’s PAT represents an increase of 167 per cent. According to its unaudited financial statement for the half year ended 30 June 2022, the company’s revenue grew by 35.12 per cent to N43.806billion during the period under review from N32.420 billion reported in 2021.
Also, its gross profit rose by 72.8 per cent to N14.2 billion from N8.22 billion recorded in 2021. Furthermore, the company revealed that subsequent to the disposal of the Tea business in October 2021, it entered into a Transitional Service Agreement with the new owner, Unilever Tea MSO Nigeria Limited.
The Agreement will be in place for a period of 15 months, during which time Unilever Plc would provide production and sales support to Unilever Tea MSO Nigeria Limited in exchange for a fee.
However, cost of sales rose by 22 percent to N29.605 billion in 2022 as against N24.204 billion while marketing and administrative expenses grew by 32.34 per cent to N8.884 billion from N6.713 billion recorded in 2021.
The increase in the exchange rate has forced manufacturers to borrow at a high rate, thereby increasing the cost of production, made worse by the infrastructure deficiency which has inevitably transferred the high production cost to consumers. This has made manufacturers less competitive, shrinking their profit margins, as the naira’s devaluation takes its toll on imported raw materials.
Aside from the increased cost of raw materials, some manufacturers, especially multinational consumer goods companies that have taken up foreign currency liabilities are also groaning under the pressure of the increased cost of the dollar.
Assessing the company’s results, analysts at Cordros Research, noted that the company’s performance was below its 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”, they said.