Unilever Nigeria: Company grows Q3 PAT by 143% y/y to N4.83bn
As Opex, interest income soar by 39%/ 8% respectively
Shareholders of Unilever Nigeria Plc may have commenced boosting their holdings in the company in expectation of rewarding corporate action for the 2017 financial year.
This is because the company posts sound earnings, with higher operating expenses.
Unilever’s rights issue offer of N63bn of which proceeds will be used to settle foreign currency intercompany loans, support working capital and for capacity expansion, closed in September, 2017.
The company’s third quarter result for the period ended 30th September, 2017, released by the Nigerian Stock Exchange (NSE), Friday, 20th October, showed positives on major key P&L items.
The result showed that Unilever sales and Profit After tax (PAT) peaked at N24.0billion and N1.1bn, reflecting 37 per cent y/y and 143 per cent y/y growth respectively.
According to the Q3 financials PBT closed at N1.8bn, against PBT of N24million reported in Q3 2016. However, net interest charges and operating expenses grew by 8 per cent y/y and 39 per cent y/y respectively, yet, the bloated opex and interest charges were not strong enough to offset the y/y sales growth and a 661bp y/y gross margin expansion, leading to the strong bottom-line.
The company’s Q3 PAT growth was slower because of a tax expense of –N630m compared to a tax credit of N450m in Q3 2016.
Analyzing the company’s result on sequential basis, sales grew 5 per cent q/q, but PBT and PAT weakened by -38 per cent q/q and -45 per cent q/q, respectively.
The declines in profit were due to a combination of factors – a -188bp q/q contraction in gross margin while operating expenses and net interest costs rose by 20% q/q and 29% q/q respectively.
On a 9M basis, sales of N69.1bn grew by 39% y/y. PBT and PAT of N6.8bn and N4.8bn advanced by 352% y/y and 208% y/y respectively. Net interest charges and operating expenses grew by 47% y/y and 6% y/y respectively.
However, these were not strong enough to offset the strong sales growth and a 153bp y/y gross margin expansion to 31%.
Year to date, Unilever shares have gained 38% and are tracking in line with the broad index, which is up 36% this year. We expect the market’s reaction to these numbers to be neutral to slightly positive.
