Earnings Update: Unilever Nigeria Plc Q2 2024 – Net Profit Weakens as Cost Pressures Intensify

Event

Unilever Nigeria Plc (“the Group”) achieved a revenue growth of 27% year-on-year in Q2 2024 to N31.59 billion (Q2 2023: N24.87 billion), underpinned by a broad based expansion across all business segments. The Food Product segment (60% of total revenue) expanded by 29% year-on-year, Personal Care segment (33% of total revenue) posted a 20% year-on-year, and Beauty & Wellbeing (7% of total revenue) grew by 51% year-on-year.

Notably, the double whammy of persistent inflationary pressures, and Naira depreciation led to a significant escalation of cost of goods, which skyrocketed by 277% to N20.21 billion (Q2 2023: N5.37 billion). The Group’s pricing power proved insufficient to fully offset the input costs, and as a result, gross margin contracted to 36% (Q2 2023: 78%).

Outlook

We project sustained revenue growth, underpinned by both volume expansion and strategic price adjustments. Volume growth is expected to be fueled by enhanced market penetration efforts for existing brands, and the potential traction from the new “Rexona 72 hours deodorant” launched earlier this year.

The Group’s effort to localise raw material sourcing has mitigated FX exposure, effectively hedging against significant losses amid the Naira depreciation. However, we remain cautious on input cost pressures, as inflationary pressures continue to stoke costs.

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