Unilever: revenue growth as a bailout of losses

Unilever Nigeria Plc emerged from losses in 2020 to deliver impressive performance in 2021, driven by a significant increase in revenue and resulted in the payment of dividends to shareholders

The company increased its revenue by 35.07% to N70.52 billion in 2021 from N52.21 billion in 2020, mainly driven by the company’s HPC which gained 47.1%, while the food segment fell 10.6%.

Significantly, the HPC segment in 2021 contributed 56% of revenue compared to 43.6%, while that of the food segment contributed 44% compared to 56% in 2020.

The directors, likewise, have recommended to shareholders the payment of a dividend in respect of the financial year ended December 31, 2021, of 2.87 billion naira, which translates to 50 kobo gross per share. The financial year ended 31 December 2021 was a year of recovery for Unilever Nigeria Plc as the global and domestic economy emerged from COVID-19

Revenue increase

Unilever with 93 distributors in 2021 compared to 102 in 2020, the company recorded domestic revenue growth (in Nigeria) of 37.1% to 69.8 billion naira in 2021 compared to 50.89 billion naira in 2020, while export earnings (outside Nigeria) fell by 42.7% to N756.5 million from N1.32 billion reported in 2020.

The company’s revenue growth could be supported by higher volumes of its tier four products (launching in 2020), increased investment in its distribution network and marginal price increases for certain products.

Similarly, increased credit sales to distributors as management eased its strict credit policy could also support revenue growth. Impressive revenue growth offset cost of sales (CoS) which increased by 22% to N50.16 billion in 2021 from N41.14 billion in 2020 as raw materials and consumables contributed to 50%.

The company increased its raw materials and consumables by 33% to 37.97 billion naira in 2021, from 28.53 billion naira in 2020. Unilever Nigeria’s high exposure to currency risk remains a major risk to the drop, because the company imports 50% of its raw materials. Consequently, the CoS/Revenue ratio decreased from 78.8% in 2020 to 71.13% in 2021.

Operating Expenses

Unilever Nigeria’s operating expenses recorded a 39% increase in sales and distribution expenses in 2021, while marketing and administration expenses also increased significantly by 42%. Sales and distribution expenditure increased from 2.39 billion naira in 2020 to 3.32 billion naira in 2021, while marketing and distribution expenditure increased to 3.32 billion naira in 2021 from 2 .39 billion naira in 2020.

For marketing and administration expenses, brand and marketing reported in 2021 increased by 77% to N4.82 billion from N2.73 billion in 2020, while overheads reached 8. 44 billion naira in 2021 from 6.6 billion naira in 2020. Royalties and Service charges also increased by 42% to 1.87 billion naira from 1.32 billion naira in 2020.

Unilever Nigeria has technology and brand agreements with Unilever UK Plc to manufacture, distribute and market its international brands. In return, a royalty of two per cent of net sales value and 0.5 per cent of net sales value is payable to Unilever Plc for technology and brand licenses respectively.

In accordance with the approval of the regulatory authorities, the National Board for Acquisition and Promotion of Technology, the payment of royalties for these agreements is capped at N3.47 billion and N0.87 billion respectively per year.

In addition, Unilever Nigeria has entered into a central management support and services agreement with Unilever Europe Business Center BV (formerly Unilever Plc) for the provision of strategic corporate direction and expert advice/support on matters legal, tax, financial, human resources and information technology. . In return for this, a commission of 2% of the pre-tax profit is payable as a service commission.

In accordance with the approval of the regulatory authority, the National Board for Acquisition and Promotion of Technology, the payment of fees for central support and management services is capped at 0.11 billion naira per year. According to profit and loss figures, Unilever Nigeria’s financial revenue fell by 34% to 1.03 billion naira in 2021 from 1.55 billion naira in 2020.

The decline in financial income is due to the net foreign exchange gain on the translation of foreign currency denominated balances to 436.6 million naira in 2021 compared to 1.34 billion naira in 2020. With the decline in financial income, financial expenses also fell 68% to 95.7 naira. million in 2021 compared to 294.99 million naira in 2020.

With revenue growing, the company closed the 2021 financial year with a pre-tax profit of N1.88 billion compared to a pre-tax loss of N4.54 billion reported in 2020. Unilever Nigeria’s profit for l year went from a loss of 3.97 billion naira to 3 billion naira. .41 billion in 2021.

Consequently, earnings per share (EPS) turned positive at N0.59 (including gains from the divestiture of the tea business) compared to loss per share of N0.65 in 2020. Adjusting EPS for disposal gains, the EPS result is still positive, although it is below N0.12.

Other growth indices

Unilever Nigeria Plc increased its total assets by 18.33% to N108.3 billion in 2021 from N91.52 billion, with the contribution of suppliers and other creditors playing a key role. Although the company’s long-term assets fell by 19% to 22.4 billion naira in 2021 from 27.54 billion naira in 2020, short-term assets increased by 34.27% to 85, 91 billion naira in 2021 compared to 63.98 billion naira in 2020.

Trade and other short-term asset receivables increased from N12.96 billion in 2020 to N14.99 billion in 2021. Unilever Nigeria sold its tea business to Unilever Tea MSO Nigeria Limited, a related party within the Unilever group, for a considerable amount. amount of 5.4 billion naira in 2021.

Unilever’s tea business was included in the discontinued operations segment of the financial statements, which revealed that the company had also disposed of property, plant and equipment as well as retirement obligations.

Before the company ceased operations in October 2021, it had revenue of N9.05 billion from January to September 2021, down 7.17% from what it did. generated during the corresponding period of 2020.

However, the tea business moved from a loss position to a profit of N2.72 billion in the nine-month period of 2021. Suppliers and other creditors closed 2021 at N39.74 billion. from 27.42 billion naira in 2020, to push current liabilities to 40.22 billion naira, an increase of 45% from the 27.8 billion naira reported in 2020.

last line

Unilever Nigeria closed the 2021 financial year with long-term liabilities of 2.31 billion naira compared to 1.59 billion naira in 2020.

In addition, total liabilities increased significantly by 45% to N42.53 billion in 2021 from N29.39 billion in 2020. Thereafter, total equity increased by almost 6 % to reach N65.76 billion in 2021 from N62.13 billion in 2020.

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