On Thursday, Unilever Nigeria Plc published its unaudited FY 2019 results, announcing a disappointing 34.0% y/y slump in revenue to N60.8 billion in 2019 from N92.0 billion in 2018. Q4 revenue was higher by 1.8% q/q but was down 57.9% y/y to N9.1 billion.
The steep decline in Q4 revenue follows a disappointing quarter and compounds an already disappointing 2019 where revenue plunged in 3 of 4 quarters. In line with our observation in Q3, the plunge in revenue comes alongside a steep decline in receivables.
Trade receivables fell 26.9% q/q to N24.5 billion in Q4 2019. This explains our findings on how the company has restructured its route to market while cutting down on credit extension to distributors. To buttress this, we note that over the past 5 quarters, quarters with over 20.0% decline in receivables (Q4 2018, Q3 2019, Q4 2019) have seen revenue plunge at least double digits within the quarter implying quarters, where growth in Revenue was recorded, were driven by elevated credit sales.
The company’s two product segments were pressured within the quarter with Home and Personal Care (HPC) business suffering the biggest weakness declining 39.5% y/y to N28.8 billion in FY 2019. In addition, the Food Products business segment fell 28.0% y/y to N31.9 billion in FY 2019.
Cost of Sales (adjusted for Depreciation) declined by 16.6% y/y to N52.3 billion in FY 2019 from N62.7 billion in FY 2018 largely on the back of lower volumes. On a q/q basis, Cost of Sales grew faster than the growth in Revenue, climbing 13.9% q/q to N11.7 billion in Q4 2019. The faster decline in revenue and per-unit cost pressures saw Gross Profit decline 71.1% y/y to N8.5 billion.
We note the company recorded a Gross loss of N2.5 billion in Q4 2019, higher than Q3 2019 Gross loss of N1.3 billion. Input cost continues to pressure operating performance as high cost of industrial heavy Linear Alkyl Benzene continues to pressure margins in the HPC business. Overall business Gross margin dipped 17.9ppts y/y to 13.9% for FY 2019.
In the face of pressured revenues and input costs, management placed a tight lid on Operating Costs. Thus, Marketing & Administrative Expenses, as well as Selling & Distribution Expenses adjusted for depreciation, dipped 10.3% y/y and 28.7% y/y to N12.7 billion and N2.6 billion respectively for FY 2019. However, the decline in Operating Expenses was inadequate to stop the company from recording negative EBITDA.
Loss before depreciation & amortisation printed at N7.6 billion in FY 2019 against EBITDA of N11.1 billion in FY 2018. Despite lower Depreciation & Amortisation (down 4.5% y/y to N2.8 billion), the company recorded Operating loss of N10.4 billion in FY 2019 compared to Operating Profit of N8.2 billion in FY 2018. The company also recorded a 97.1% y/y decline in Other Income to N0.7 billion in FY 2019 from N2.3 billion in FY 2018 which further dragged losses.
Net Finance Income was down 35.2% y/y to N2.0 billion in FY 2019 from N3.1 billion in FY 2018 due to lower Interest Income (down 20.4% y/y to N2.9 billion) and higher Interest Expense (up 82.1% y/y to N0.8 billion). The decline in Net Finance Income was driven by decline in Cash & Cash Equivalents (down 37.5% y/y to N35.7 billion) for the period.
The Net Finance Income booked tempered losses, but the company still posted Loss before Tax of N8.3 billion in FY 2019 as against Profit before Tax of N13.6 billion in FY 2018. Overall, the company booked a Net Loss of N4.2bn in FY 2019 as against a Net Income of N10.1 billion in FY 2018. We note the company saw Loss after Tax grow in Q4 2019 by 58.6% to N4.8 billion from N3.0 billion in Q3 2019.
In our earlier notes, we have communicated our concerns on the growth prospects for Unilever. The company’s disappointing Q4 performance confirms our fears. Our model is currently under review.
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PZ Cusson announces retirement of Chairman, Kola Jamodu
PZ has announced the retirement Chief Kola Jamodu as Non-Executive Director and Chairman of the Board of the company.
The Board of Directors of PZ Cussons Nigeria Plc has announced the retirement of Chief Kola Jamodu as Non-Executive Director and Chairman of the Board of the company.
This disclosure was made in a notification signed by the Company’s Secretary, Jacqueline Ezeokwelume, and sent to the floor of the Nigerian Stock Exchange.
According to the notification issued by Mrs. Ezeokwelume, Chief Kola Jamodu will retire as a Non-Executive Director and Chairman of the Board effective 11 December 2020 to enable him to pursue other personal endeavours.
What you should know
Chief Jamodu joined PZ Cussons Group in 1974 and served in Executive positions for 24 years rising to the position of Chief Executive Officer of the Company, a position he held until he retired in 1999.
He thereafter continued as a Non-Executive Chairman of the Board until 2001 when he was appointed as the Honourable Minister of Industry of the Federal Republic of Nigeria, a position he held until 2003.
He was reappointed as the Chairman of the Board of PZ Cussons Nigeria Plc in November 2014.
Naira devaluation, FX scarcity caused increase in cost of goods – Nigerian Breweries
Nigerian Breweries has revealed that Naira devaluation, FX scarcity caused increase in the cost of its goods in 2020.
The Finance Director of Nigerian Breweries Plc, Rob Kleinjan, has revealed that the increase in the brewer’s costs of goods was due to the devaluation in naira and FX scarcity, which led to the increase in the cost of inputs such as sorghum and sugar, as they are not fully produced locally.
This disclosure was made during the Nigerian Breweries’ Fact Behind Figures results presentation today.
However, Kleinjan explained that the increase in cost could not be fully attributed to currency devaluation and foreign exchange scarcity, which exerts pressure on imported input materials.
He said the increase in Nigerian Breweries’ costs of goods sold, as reported in its unaudited financial results, could also be linked to the volume of goods sold, as the company’s sales volume in Q3 increased by almost the same percentage as the cost of goods sold.
However, Mr. Kleinijan reiterated that to mitigate further losses, it was important for the company to focus on the supply chain and seek ways to mitigate price increases.
What they are saying
The Managing Director of Nigerian Breweries, Mr. Jordi Borrut, while speaking at the virtual event said:
“In 2020, the results of Nigerian Breweries were adversely impacted by COVID, VAT increase, FX devaluation and scarcity of foreign exchange. The year started with a promising 1st quarter, which was heavily impacted in Q2. The Nigerian market, however, rebounded in Q3.”
Mr. Rob Kleinjan, while explaining the factors behind the increase in Nigerian Breweries’ cost of goods sold in the first nine months of 2020, said:
“It is also clear that the increase in cost is due to the devaluation and the FX scarcity which has put pressure on our input cost. If you look into the main elements we use, which are sorghum and sugar – they are not fully produced locally, so when the currency is devalued, the prices of these inputs will soar.
“That’s why it’s important that we are focused on the supply chain, and seek for ways we can mitigate any of the price increases, because the increase in cost comes from the input prices, which come from FX scarcity.”
United Securities Limited changes name to Coronation Registrars Limited
United Securities Limited formally notifies its numerous customers and stakeholders of a change of name to Coronation Registrars Limited.
In line with section 30(3) of the Companies and Allied Matters Act 2020 (CAMA), United Securities Limited has formally notified its numerous customers and stakeholders that it has obtained regulatory approval from the Corporate Affairs Commission to change its name to Coronation Registrars Limited.
The disclosure is contained in a verified post on Linkedln, signed by the firm’s Secretary, Omotoyosi Kola-Ojo, and seen by Nairametrics.
What this means
In line with the recent corporate action and according to section 30(5) of the Companies and Allied Matters Act, the company has been issued a new Certificate of Incorporation by the Registrar General of the commission, evidencing the change of name.
What they are saying
A verified post by the Firm read thus: “The Public is hereby informed that United Securities Limited having passed the necessary Special Resolutions in line with Section 30(3) of Companies and Allied Matters Act 2020 (CAMA) and obtained the necessary regulatory approval of the Corporate Affairs Commission, has changed its name to CORONATION REGISTRARS LIMITED.
“The public is further informed that pursuant to Section 30(5) of the Companies and Allied Matters Act, the company has been issued a new certificate of incorporation by the Registrar General of the Commission evidencing the change of name. All stakeholders are requested to take note of the above information.”