Unilever Nigeria earlier today held its first ever conference call. Management discussed a range of issues pertaining to the company, the fast moving consumer goods sector and the Nigerian economy as a whole. The company is currently raising about N40 billion through a rights issue at the rate of 14 shares for every 27 shares held as at June 28 2017. The offer opened on August 1 and closes on September 8.
On foreign exchange
The Executive Director in charge of finance, Adesola Sotande-Peters says the foreign exchange situation had improved massively. The company sources its foreign exchange from the inter- bank market and uses several banks. In order to hedge volatility, Unilever makes use of forwards and swaps.
Rationale for the rights issue
The severe difficulties in getting foreign exchange last year, forced the company to take a dollar denominated loan from its parent company and inter company loans for the first time since its existence. The parent company will pay for its rights issue like every other shareholder, unlike some other Fast Moving Consumer Goods (FCMGs) that converted loans into equity. Proceeds from the issue will be used to pay back the dollar loan and increase its stock of raw materials, due to the new products. Unilever is keen to pay off the loan to avoid the risk of a further devaluation of the Naira.
Unilever plans to introduce several new products this year, but the MD was reluctant to name them for competitive reasons. The company has developed a strategic five year development plan in relation to new products.
Unilever has taken strategic steps to source raw materials such as vegetable oil, starch paste and sorbitol from local suppliers. The company is also in discussions with several industries to supply it packaging materials.
Outlook for the FCMG space in H2 2017
The FCMG space will continue to remain challenged as wages have not been increased to meet the galloping inflation. Despite this, Unilever sees opportunities for growth. The company has seen growth in the sale of Knorr cubes, and has made it available in smaller packs.
Unilever shares closed at N40 in today’s session on the Nigerian Stock Exchange (NSE). Year to date, the stock is up 14%.