Unilever Nigeria Q3 2017 results: first reaction

Event: Unilever Nigeria reports Q3 2017 results

Implications: Modest upward revisions to consensus estimates expected

Positives: Sales up 37% y/y, PBT and PAT up significantly y/y

Negatives: Opex up 39% y/y


Earlier this afternoon, Unilever Nigeria (Unilever) reported its Q3 2017 results which showed positives on major key P&L items. Sales and PAT of N24.0bn and N1.1bn grew by 37% y/y and 143% y/y respectively. PBT of N1.8bn compares with PBT of N24m reported in Q3 2016. Although net interest charges and operating expenses advanced by 8% y/y and 39% y/y respectively, these negatives 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 growth in PAT was slower because of a tax expense of –N630m compared with a tax credit of N450m in Q3 2016. On a sequential basis, sales were up 5% q/q while PBT and PAT declined by -38% q/q and -45% 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%.


On an annualised basis, Unilever’s 9M sales are tracking ahead of consensus’ FY 2017E estimate of N83bn. PBT and PAT are ahead by 20% and 42% respectively. As such, we expect to see upward revisions to consensus’ FY 2017 estimates.


Again, Unilever’s Q3 2017 PBT was around N2bn which was the usual run rate for the company before macroeconomic difficulties weighed upon on the industry. Gross margin was above 30% for the second consecutive quarter. This can be attributed to the CBN’s intervention in the fx market through the NAFEX window. As such, we believe the company is very well on the road to recovery.


Unilever’s rights issue offer of N63bn closed last month. We await the results announcement by the company. On its last conference call, management indicated that the proceeds will be used to settle foreign currency intercompany loans, support working capital and for capacity expansion.


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.


We rate the stock Neutral. Our estimates are under review.

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