Unilever Nigeria Plc has reported a decline of 95.47 per cent in its profit after tax for the first half of 2015.
The company’s half-year pretax profit fell to N94.07m, from N2.07bn in the same period last year, while its post-tax profit plunged to N85.57m from N1.47bn in 2014.
Its revenue dropped to N28.72bn in the six month period ended June, compared to N29.18bn last year, the household consumer products maker said, in a statement.
The company’s unaudited results for the period ended June 30, 2015, which it filed with the Nigerian Stock Exchange, showed that its financial charges rose 137 per cent to N1.61bn in the period from N677.8m the previous year.
Analysts at FBN Capital Limited, in their analysis of Unilever’s second quarter 2015 results, said the results showed that sales of N13.8bn were down 10.6 per cent year on year.
The analysts said, “Unilever recorded the PBT and PAT losses of N771m and N505m, respectively. These compare with profits of N988m and N714m posted in Q2, 2014. The weak performance was driven by a combination of factors: Unilever’s finance charges, which grew by 160.5 per cent to N716m; a contraction of -329bps y/y in gross margins to 33.9 per cent; and a rise of 6.1 per cent y/y in operational expenses.
“The insecurity challenges in the North East and increased competition in the southern markets make it difficult for consumer goods names to pass on higher costs to consumers, owing to fears of losing market share. Our channel checks indicate that Unilever has lost ground in several key consumer segments.
According to the analysts, the devaluation of the naira is the major driver behind the gross margin contraction recorded during the period.
“However, we do not think it explains the significant rise in finance charges as Unilever’s loan book is predominantly naira denominated. Unilever’s loans have risen by 44 per cent since Q2, 2014. Opex growth came in quite strong as the company continues to increase its brand awareness for the aforementioned reasons.
On a sequential basis, sales were down by 7.4 per cent quarter on quarter, while the loss before tax and loss after tax compare with the PBT and PAT of N866m and N590m, respectively in the previous quarter, according to the analysts.”
They also said, “Compared with our estimates, while sales missed by 14 per cent, the PBT and PAT were significantly behind our forecasts of N784m and N549m, respectively. Finance costs came in 44.5 per cent higher than we were forecasting. On an annualised basis, sales are behind consensus’ estimates by four per cent, while the PBT is tracking significantly behind consensus’ FY PBT forecast of N3.7bn. We expect marked downward revisions to consensus’ forecasts.
“We do not expect a turnaround in Unilever’s fortunes in the near to medium term, given the weak macro environment. We continue to believe that consumer goods names with a material exposure to non-food such as Unilever are particularly disadvantaged.”
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Source : Punch