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UNILEVER Higher Increase in Costs Weighs on Margins; DLM Recommends HOLD

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UNILEVER Higher Increase in Costs Weighs on Margins; DLM Recommends HOLD

Friday, April 11, 2014 04:42 / DLM Research

Sales revenue improves by 8.0% y/y. In its full year 2013 audited results, Unilever Nigeria reported revenue of N60.00billion, i.e. an increase of 8.0% compared with N55.55billion in 2012. The sales revenue recorded in the period is below our estimates of N61.10billion by 1.8%. On a quarterly basis, the company’s sales revenue of N14.39billion in 4Q2013 increased by 3.6% compared with N13.89billion in 4Q2012. Also, the revenue in the last quarter of the review year is lower than our estimates of N15.50billion by 7.2%.


Input costs are in line with our estimates. For the review year, Unilever’s cost of sales (COS) of N37.55billion is higher than N33.90billion recorded in 2012 by 10.8%. Also, the COS is marginally below our estimates of N37.59billion by 0.1%. The higher y/y growth in the COS compared to the growth in the revenue resulted in an increase in COS/revenue ratio to 62.6% relative to 61.0% in 2012. In the fourth quarter of 2013, Unilever Nigeria posted a y/y increase of 9.6% in COS to N8.59billion (4Q2012: N7.84billion). Consequently, full-year gross profit moved up by 3.7% to N22.45billion compared with N21.65billion in 2012.

Growth in operating expense depressed operating profit. In the review period, the company recorded operating expenses of N14.55billion, up 14.2% y/y from N12.65billion in 2012. Again, the operating expenses beat our estimate of N14.06billion by 3.5%. The increase in operating expenses resulted in a higher opex/revenue ratio of 24.2% relative to 22.9% in 2012, therefore operating profit declined by 11.4% to N7.88billion against N8.89bilion in 2012. Furthermore, total cost moved up by 11.7% to N52.10billion in the review year compared with N46.64billion in 2012. Consequently, total cost to revenue ratio moved up to 86.8% relative to 84.0% in the preceding year, hence pre-tax profit decline by 15.6% y/y to N6.91billion in the review year.

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While the website is checked for accuracy, we are not liable for any incorrect information included. The details of this publication should not be construed as an investment advice by the author/analyst or the publishers/Proshare. Proshare Limited, its employees and analysts accept no liability for any loss arising from the use of this information. All opinions on this page/site constitute the authors best estimate judgement as of this date and are subject to change without notice. Investors should see the content of this page as one of the factors to consider in making their investment decision. We recommend that you make enquiries based on your own circumstances and, if necessary, take professional advice before entering into transactions. This article is published with the consent of Dunn Loren Merrifield, the author(s) for circulation to the online investment community in accordance with the terms of usage. Further enquiries should be directed to the author whose e-mail is Dunn Loren Merrifield Limited [] otherwise comments should be sent to

Tags: DLM Research,  Unilever Nigeria,  COS,  cost of sales,  profit, 

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