Unilever Nigeria posts N43.8bn as turnover in six months
Unilever

By OKEY ONYENWEAKU

Shareholders of Unilever may not be particularly pleased with recent developments in their company which appear to have not only dashed their hopes but may also deny them their much-anticipated returns.

Indeed, the mood at the moment is that virtually all who are associated with Unilever seem to be wearing long faces. Their hard-earned money (Investment) is gradually slipping away as the company’s poor performance becomes more heart-rending. But then who would blame Unilever for performing woefully in an environment that is so full of land mines? And though there is that expression that adversity brings out the best in us, the reality today is that the management of Unilever may not have lived up to desired expectations in that regard.

This is because Unilever Nigeria Plc has once again posted a disappointing result and put its owners on edge. This is reflected in the company’s growth trajectory drift to the red. It now has red ink all over the balance sheet. For instance, the company recorded a huge profit slump of 12 per cent; coming down from a profit of N10.552billion in 2018 to a huge loss of N7.419 billion in 2019. While operating profit was negative at -N11.763 billion, profit before tax for the year ended 2019 also closed in the red by as much as -N10.071 billion.

The company’s loss disposition was partly caused by the huge decline in its revenues by as much as 35 per cent; declining from N92.899 in 2018 to N60.486billion in 2019.

Putting it grimly, Unilever’s auditor, KPMG notes: “For the year ended 31 December 2019, revenue amounted to N60.5 billion which was a significant reduction of 35% in comparison to the prior year’s figure of N92.9 billion”,

The auditor also explained that: “During the year, the directors identified certain idle assets relating mainly to plant and machinery. The assets were assessed to be idle due to technological obsolescence and outsourcing of some production processes requiring their use to third parties. These circumstances indicated that there were potential indicators of impairment of these assets. Accordingly, management estimated that the impact of this impairment amounted to N1.3 billion as of 31 December 2019.

This is considered a key audit matter due to the significant judgments and estimate required in

evaluating the impairment allowance.’’ KPMG also said

From the first quarter of 2019, there had been strong indications that the company was headed for the rocks. A cursory look at the result shows that its profit before tax fell 45.9 per cent in the first quarter from N3.7billion in 2018 to N2billion in 2019.  In the second quarter in June 2019, Unilever posted another discouraging performance with a decline by 37.7 per cent to N4.69billion.

The company’s performance worsened by the day as its third-quarter profit before tax plunged 94.9 per cent. This discouraging performance, analysts observed was a recipe for huge losses and a most uncomfortable situation for shareholders. For a company in which revenues were also on the plunge for three quarters (first, second and third) consecutively, there was not going to be any remedy for a soured soup.

Aside from the deterioration of its net assets, the company’s profit trajectory was positive as it grew by 738.6 per cent from N1.77billion in 2015 to N14.852billion in 2018 before plunging into the red zone. In the same period under review, Profit after tax also took the same trend, as it grew by 784.9 per cent before ending badly in the fourth quarter performance. Its stock has also dropped 67.73 per cent Year on Year to N10.50 per share on the daily price chart of the Nigerian Stock Exchange.

With this disappointing showing, the company which is one of the biggest players in the Personal/ Household Products segment of the NSE has betrayed a heightened degree of weakness.

The poor results notwithstanding, there are however some positives in Unilever’s corner as in, for example, its yet impressive Corporate Social Responsibility, CSR offerings:

‘’The company has also leveraged its great brands to impact lives positively. In line with the social mission of health and hygiene, through brands like Knorr bouillon cubes, Pepsodent and Lifebuoy,

Unilever has organized various outreach programmes that have enlightened Nigerians on the health benefits of handwashing, brushing twice a day, having iron-fortified bouillon cubes and addressing iron deficiency through behavioural change campaigns.”

Not relenting, the company still gives itself high marks:

“ The Company has high growth aspirations, with a vision to grow our business whilst decoupling our environmental footprint from our growth and increasing our positive social impact. An ambition which is consistent with our long history of doing well by doing good.

Unilever Nigeria’s confidence in the Nigerian economy is unwavering and will remain a major player in the country by continually investing, developing capabilities and growing brands that most suit the consumers’ needs,” the company said.

Some market observers who corroborated the assertion above said that indeed the company used to be the darling of its customers in the 70,s ’80s until even early 2000. They, with nostalgia, remembered that Unilever’s products used to be permanent features in the kitchen shelves of many homes. But most of them admitted that the times have changed for one of the biggest players in Nigeria and the world.

This, analysts believe, was due to lack of creative and efficient management of costs during the period under review.

Analysts reckon that the weak global economy was having a toll on a firm whose product lines are facing stiff competition. Some of them also blame a lack of proactive response to the challenges on the part of its research and development department.

‘’It is not easy for firms to survive the times, especially when it appears there is a global depression’’, said a Lagos based market analyst, Olisa Egbunike.

Indeed, over the years, the manufacturing sector has suffered a huge set back emanating from the Power Crisis, Misappropriation of Funds by Government, Excessive Dependence of Nigerians on Imported Goods,

Lack of finance, classification of the Manufacturing Industry as a high-risk area for bank lending, the Issue of globalization, high cost of production and poor infrastructure among other impeding challenges.

But these have not deterred some of them like Unilever, UACN, PZ Cusson among others from striving overall to yet achieve their short and long term goals.

Market analysts have attributed the weak performance of manufacturing companies to the prevalent macroeconomic challenges in Nigeria. While some of them fingered lack of economic direction of President Buhari as one of the strong reasons, others have hinged it on tight regulation of both the fiscal and monetary authorities. Yet a third group has sadly pointed at the shrinking revenues of the nation, caused by the volatility in crude price, lack of productivity and increased funding for security, in addition to low disposable income in the hands of consumers. These, market observers believe have also been responsible for the near weak performance of other sectors of the economy. Within this depressing climate, Nigerian economic growth stood sadly at 2.55 per cent at the end of 2019.

These have dealt a heavy blow on business operations as many firms seem to be struggling to survive.

On its part, the leadership of the Manufacturers Association of Nigeria, MAN has almost always fingered lack of disposable income in the economy and some ill-advised policies as the cause of mounting inventories of unsold stock in the warehouses of Manufacturers.

“Most of our members complained of their unsold stock inventories because people are not buying their goods.

“A situation where you generate your power for production does not make you competitive, because whatever is produced in this country is produced at a higher cost when compared to other parts of the world.

“The same goes for the transportation system as we still move our good via roads, even the heavy-duty goods. Such good which should go by rail lack enough rail lines to carry them.

“There is a need to develop the transportation sector to the point where it can support the manufacturing sector and also support the economy,” The said.

Market observers have also noted that manufacturing capacity utilization has continued to slide since it hovered between 70 and 75 % from 1975 to 1980s. There is also stiff competition in the industry as imported cheaper products are almost everywhere in the market.

Whereas the government has excluded importers of 43 items from accessing forex to boost their market, the recent closure of the border has impeded exportation of manufactured goods.

These have deterred some of them like Unilever whose future is bleak.

Like most other fast-moving consumer goods, FMCG, companies in the country, Unilever Nigeria Plc seems to be locked in a fight for survival as the economy continues to struggle. After two leadership changes in the past few years, it appears the worst is not over as its woes persist. The once highly treasured jewel of the Conglomerate sector is by all indications now a walking ghost of its past.

Experts had long made the call on the sector but optimistic investors and shareholders believed that there could be a turnaround. But Unilever has joined UACN, PZ, and Leventis which are now merely struggling to survive.

However, and in what observers see as a surprise move, the company recently changed its operating model in what the management term as its choice to tighten the noose around crippling indebtedness to key distributors. Its non-performing receivables have been building up for quarters, and adjustment to credit terms led to massive sales decline as distributors channels logged out demand. How this would pan out in the months and years ahead could be key to making the next major call on the fortunes of this long-standing Nigerian commercial and industrial behemoth that has seen better days. We wait.

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