Unilever Nigeria Plc turned the tide in 2024, posting a profit after shutting down its loss making Home Care segment. A surge in revenue reflected strong demand across product lines, while a revaluation gain and restructuring writeback provided much needed relief. Despite rising inflation, naira devaluation, and surging operating expenses, the company’s strategic cost-cutting efforts helped it return to profitability.
Earnings surprise on gross margin volatility "In its unaudited FY’22 financial statements, Unilever Nigeria PLC reversed the weak earnings reported in the 9M period (a loss of ₦0.3 billion). Bottom-line improved 4x to ₦5.9 billion in FY’22, bucking our expectation of suppressed profitability. Although Q4 topline printed at ₦23.9 billion, in line with our projection of ₦23.4 billion, the company contradicted our Q4 profit estimate, reporting PAT of ₦6.4 billion (Vetiva: ₦0.7 billion), the...
In its Q1’22 earnings release, Unilever Nigeria reported a 6% y/y upswing in Revenue to ₦20.6 billion, driven by growth in both the Food (+26% y/y) and Home & Personal Care (+23% y/y) businesses. We recall our expectation that the disposal of the tea business would lead to a decline in Revenues, at least for a few quarters, with a subsequent normalization in volumes. Accordingly, the performance of the food segment (which has been restated to reflect this sale), came in line with our proje...
Full Article at IIR has reaffirmed its Recommended rating for PIA after undertaking a review post the appointment of a new Portfolio Manager, Harding Loevner. The full report can be found on the IIR website. On 26 July 2021, Pengana International Equities Limited (PIA) announced a fully franked dividend of 1.35 cents per share for the June quarter. This represents an 8% increase on the March quarter dividend and takes the total dividends declared for FY21 of 5.1 cents per share, fully franked....
In the summer of 2015, I met Prof. Ed Altman at a lecture in New York. He devised the Altman Z-score in 1968 and first published his formula 50 years ago, after doggedly sifting through thousands of pages of annual reports to obtain the data for his analysis. The Altman Z-score became the gold standard for bankruptcy analysis. The Altman Z-score is a formula for determining whether a company is headed for bankruptcy. It takes into account profitability, leverage, liquidity, solvency, and acti...
On Saturday, the Organization of the Petroleum Exporting Countries (OPEC) and Russia agreed to extend 10% oil output cuts until the end of July. This amounts to an ongoing cut of 9.7mn barrels a day. Oil prices have continued their recovery after the deal was announced, but the output cuts will also add fuel to the fledging food price boom, putting upward pressure on food prices at a time of intense dislocation of food supply. The implications of the recovery in oil prices for the food indust...
The sleepy IPO market just received an espresso shot. Amidst the doom and gloom, JDE Peet's raised US$2.5bn last week, in Europe's biggest IPO since 2018. It was also the first major listing that was conducted entirely in the brave new world of Zoom calls. The deal is extraordinary in that Covid-19 did not dent its prospects. On the contrary, the issuers actually rushed the deal forward to benefit from the post-March stock market rally. The IPO process was reduced from four weeks to 10 days d...
When the history of Covid-19 is written, it may be recorded as the Zoom era. The videoconference provider has spread as rapidly as the virus. It’s users have risen 30 fold from just 10 million in December 2019 to almost 300 million in April 2020. Like Google and Xerox, Zoom is a now used as verb. [-eu-west-1.amazonaws.com/exotix-content-uploads/jlKmZltrPwcxUPXecrBTnY2SQyGGyhy1WJBMI30I.png] Investors are clamouring for exposure to Zoom and its videoconferencing peers, such as Cisco W...
Covid-19 has devastated the lives of Africa's poor. In many countries, the lockdowns have halted the income of day labourers, andcurbed their spending. Working primarily in construction, transport and hospitality, they are an engine of consumption, and as some countries begin to ease lockdowns, the pivotal role that the African poor pays in consumption growth will again be apparent. HOW CAN AFRICAN COMPANIES BETTER TARGET THE POOR? Companies can successfully target the poor by selling product...
Marc Rich, the infamous commodity trader, amassed a fortune despite facing extradition charges. He spent much of his life in exile in Switzerland, after the US authorities charged him with racketeering and tax evasion. Rich started a commodity trader that now forms the basis of Glencore. But even Marc Rich never faced a calamity as devastating as the crisis brought on by Covid-19. The streets are now littered with bust commodity traders. Last month, Hin Leong, a Singaporean marine fuel trader...
As families gather for Easter celebrations, the food on the table is a lot pricier than at the time of New Year festivities. Though oil prices have fallen 53% in 2020, Covid-19 has had the opposite effect onfood prices. Staples such as wheat and rice have rallied. Rice prices are now at a seven-year high. Pork, which is a vital source of protein in China, has risen 16% ytd. Oil vs food prices ytd [-eu-west-1.amazonaws.com/exotix-content-uploads/Px5m7wCNJyxNwa8nwCMk2AQlSKEhabbuy7165e...
President Muhammadu Buhari declared a shutdown of business, economic and social activities in Lagos, the Federal Capital Territory (FCT) and Ogun during his national broadcast on Sunday. The restriction aimed at curbing the spread of the coronavirus in these states, which account for 83% of all 111 confirmed cases in the country (according to the NCDC), is expected to last 14 days and will take effect from today at 11 pm. Essential services like hospitals (including clinics and pharmacies), a...
Sector valuation is now closer to fair value. Our coverage of Nigerian consumers stocks is down 21% ytd on aggregate, and currently trades at a median FY 20f PE and EV/EBITDA of 22.8x and 10.3x, respectively (average 30% discount to the 2-year historical median). In our view, the sector historically traded at unjustifiably rich multiples, and is now closer to our fair value estimates (FY 19f PE and EV/EBITDA of 23.9x and 7.9x), hence our broadly neutral stance, despite cuts to our target prices....
Unilever reported a 30% yoy decline in net income for Q2 19, although it was still a sharp recovery from its very weak Q1 19 performance. The negative yoy bottom line trend was due to: 1) top line contraction (-2% yoy), weighed by the Home and Personal Care (HPC) segment, which was more impacted by weak consumer spending; and 2) higher production costs due to an uptick in depreciation charge. On a positive note, earnings rebounded qoq, with top line and bottom line expanding by 22% and 33% respe...
Nestlé and Unilever's H1 ‘19 results illustrate that consumers are under pressure. Despite the challenges, producers increased profitability and exceeded our margin expectations due to Q2 ‘19's revenue growth together with positive operating leverage. Using Nestlé for more readthrough, it appears positive momentum in beverages is supporting the growth. Results in Q2 '19 suggest improvements to come in H2 '19. However, we highlight challenges for home and personal care (“HPCâ€) produ...
Nigeria H2'19 Outlook - Feeble feet on thorny grounds Narrow opportunity window amid easing global monetary conditions: A sense of urgency is required for Nigeria to derive optimal benefits from the sudden increase in global liquidity conditions occasioned by the switch to accommodative monetary policy by central banks in developed markets. IMF projections indicate, that global GDP growth could ease to 3.3% for FY’19 due to weaker growth in the...
Nestlé has distinguished itself compared to Unilever by investing in Nigeria, leading to outsized returns. In our view, developing markets, creating scale and investing in local capacity will determine future returns for the FMCG players. Even though the Nigerian consumer has been under pressure for the last five years (HCE: 2.9% CAGR), Nestlé has invested c.USD176m of capex and grown earnings by 14% CAGR while delivering an average ROIC (42%) which is more than double its closest peer, Unil...
We are bullish on the Africa Consumer sector and identify Nigerian Breweries (NB NL), Nestle Nigeria (NESTLE NL), and East African Breweries (EABL KN) as our top picks. In this report we introduce a proprietary valuation metric, Productive Exposure to the Poor (PEP), that rates companies based on the extent to which their business model targets Africa’s poorer segments. We also focus on Nigeria and provide individual company analysis of the eight Nigerian Consumer names in our coverage.
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