In the second quarter of 2023, Unilever Nigeria Plc (‘the Company’) faced significant challenges, primarily reflected in a substantial 73% year-on-year decrease in profit before tax (PBT). The primary cause of this profit decline was attributed to foreign exchange losses. However, it’s worth noting that the company’s underlying performance remained relatively robust.

Revenue and Cost Analysis

Revenue for Q2 2023 witnessed a noteworthy 27% year-on-year growth, amounting to N29.59 billion. This surge was mainly driven by higher pricing. Moreover, on a quarter-on-quarter basis, revenue experienced a 20% increase. This growth was necessitated by the continuous rise in input and other production costs, which compelled price adjustments.

In our effort to assess the company’s core performance, we made adjustments to the cost of sales by isolating one-off items that had been incorporated into it. We reclassified these items as non-operating activities. As a result, our adjusted cost of sales registered a 13% year-on-year decline, reaching N24.39 billion. We attribute this reduction to improved inventory management. In previous quarters, the company’s strong liquidity position enabled it to frontload inventory purchases, thereby mitigating its exposure to escalating input costs and foreign exchange fluctuations.

Operating Expenses and Profit Performance

Operating expenses exhibited a 28% year-on-year decline, amounting to N4.39 billion. This reduction was primarily driven by a 36% decrease in marketing spending, which fell from N4.83 billion in Q2 2022 to N3.09 billion in Q2 2023. On the other hand, administrative expenses increased by a modest 2% year-on-year to N1.30 billion, despite heightened inflationary pressures during the period.


Looking ahead, we anticipate the company to maintain its revenue growth driven by pricing strategies in the near term. However, we foresee margin contraction due to normalised costs, particularly higher cost margins owing to near-term foreign exchange illiquidity and inflationary pressures impacting operating expenses. The prospect for volume growth appears challenging due to the expected impact of high inflationary pressures on consumers’ disposable income, amidst industry competition.

Please follow the link “Unilever Nigeria Plc Q2 2023 – Ongoing Efficiency Measures Produce Positive Outcomes Despite Harsh Macro Conditions” to view the whole report.

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