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Unilever’s profit dips 95% as finance charges surge to N1.6bn

By on July 25, 2015

High financial charges impacted heavily on the financial results of Unilever Nigeria Plc for the half year ended 30, 2015, depressing the company’s profit by 95 per cent. Details of the results released Thursday showed that Unilever Nigeria recorded a revenue of N28.723 billion, down  from N29.28 billion. Cost of sale rose by four per cent from N18.28 billion to N18.97 billion, while distribution/administrative expenses fell marginally to  N8.25 billion, from N8.415 billion.
However, financial charges surged by 1,935 per cent from N678 million in 2014 to N1.609 billion in 2015. Consequently, profit before tax dipped by 95 per cent from N2.1 billion to N94 million.

Gross margin reduced from 37.5 per cent to 33.95 per cent, while profit before tax margin fell from 5.0 per cent to 0.30 per cent. But cost of sale margin grew from 62.4 per cent to 66 per cent.

Commenting on the performance Unilever, analysts at FBN Capital Limited said 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. We believe 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 second quarter of 2014. Operating expenses  growth came in quite strong as the company continues to increase its brand awareness for the aforementioned reasons,” they said.

The parent firm of Unilever Nigeria, Unilever Overseas Holdings B.V. recently made a offer  to increase its equity stake from 50.04 per cent to 75 per cent  as it looks to grow its business in the country and continue its long term commitment in African markets.

Unilever Overseas offered to acquire  up to 942,215,930 shares in the  from Nigerian investors at N45.50 per share in cash.

Some of the shareholders had decried the offer price, which they said,  was not attractive enough.

For instance, the National Coordinator of Independent Shareholders Association of Nigeria (ISAN), Sir Sunny Nwosu, had said  the offer  was another way of taking control of Nigerians’ shares, noting it would affect  Nigerians’ ability to benefit from the wealth creation from their national and personal resources.

Another shareholder and   founding member of the Nigeria Shareholders Solidarity Association (NSSA), Alhaji Gbadebo Olatokunbo said he did not see no incentives in the tender offer.

 

[ThisDay]