Giant FMCG, Unilever Nigeria ,on Thursday, April 19, posted its Q1 2018 results, showing grew 16% y/y to N25.8bn sales growth. PBT and PAT rose faster by 80-81% y/y.
Sales grew by 19% q/q, however, PBT fell by -11% q/q due to a -704bp q/q gross margin contraction and a -35% q/q decline in net finance income.
As a result of a relatively softer tax rate of 26% (vs. 40% in Q4 2017), Q1 PAT jumped by 11% q/q. Compared with our estimates, Q1 sales, PBT and PAT were ahead by 6%, 3% and 4% respectively.
For the last three quarters, gross margins stayed above 30%; we attribute this to the improved macro environment and more particularly, the CBN’s intervention in the fx market through the NAFEX window.
Unilever Management also said the company was working on attaining 100% sourcing of its packaging materials locally by 2019 and has begun engaging local farmers to reduce importation. As such, the 27.7% figure reported this quarter surprised negatively because we expected that the company would still be enjoying benefits from the aforementioned, particularly the former.
On an annualised basis, Q1 sales and PBT are on track to meeting consensus’ FY 2018 estimates of N101bn and N15bn respectively. We expect the market’s reaction to these numbers to be neutral to slightly positive.
Year to date, Unilever shares have gained 34.2% and are tracking ahead of the index which is up 7.0%.