[upme_private]Unilever Nigeria Plc released its H1 2013 results posting a 10.2% rise in revenue to N29.6billion (2012 H1: N26.9billion). Gross profit also rose 11.2% to N10.8billion despite a surge in cost of sales in the period under review. Operating Expenses rose 13% to N6.5billion compared to N5.7billion same period in 2012. Despite increase in operating expenses, Operating profit rose 8.5% YoY to N4.3billion. Pre-tax profits also rose 3.8% to N3.9billion in June 2013. Earnings per share will however remain flat at 72kobo per share following a more conservative provision for income taxes.
- Revenue Growth was actually better using QoQ comparisons. The company generated N15.4billion this quarter compared N14.2billion generated in Q1 2013. QoQ Growth was therefore 8% compared to same period in 2012 which dropped 9%.
- Their two core business segments Food Products & Home and Personal Care posted 10% and 11% year on year growth, each adding 12.6 and N17billion to 2013 Half Year revenue respectively.
- Unilever continued its investment in capacity expansion spending another N2billion 6 months to date and an extra N1billion from March 2013. Funding for capacity expansion surprisingly came from new loans during the period. Investment in the last one year has now topped N5billion.
- Debt to Equity rose sharply to 1.16 as the company increased its overdrafts facilities and short term loans by a whopping N4billion. The company did not reveal details of the loans in the report released to the NSE.
- Interest cost increased 60% to N497billion compared to the same period last year. Interest payment as a percentage of Operating profit has been on a steady increase in the last 6 quarters. It has now grown from N180million in the whole of 2011 to about N380million in the first half of 2013 alone. This is still 9% of operating profit and I do not see it rising above 14% at the end of the year after interest from newly acquired loans start to kick in.
- Unilever still generated Ebita cash flows of around N9billion annually (2012) which to an extent can provide buffer for debt repayments. However, I expect the company to refinance their overdraft by converting them into longer term facilities.
- The company also faces a working capital shortfall of about N10billion which it has basically been financing from trade creditors
- With a return on equity of about 31% this half year, shareholders need to worry of about the impact of taking on debts on their value. Unilever also post a comfortable return on asset of of over 26% last year, which is set to go even higher providing extra cover for high interest rates. Shareholders have also cashed in over N10billion in dividend payments in the last one year alone even though it amount to a below market dividend yield of just 2.2% (TTM)
- Unilever has a share price of N62 and a price earnings ratio of 42x. Intending investors will have to hope the obvious overprice value of the stock will persist otherwise they only stand to get a yield of just 2.3%.
- The risk of a value impairment on the share price makes a purchase option all the more precarious
Unilever released its 2013 H1 Results in the website of the NSE[/upme_private]
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