Unilever Nigeria records 252.52% drop in net profits

The year has not been the best for Unilever Nigeria with the year’s highest at N18.78 and lowest at N12.30 for having added mere N1.21 to sell at N19.99.
MADUKA NWEKE

During the January trading summary the stock selling at N12.50 ended the month at N13.29 making a different of 79 kobo or 6.32 percent increase.

In February, it merely added 46 kobo or 3.46 percent from N13.29 to N13.75 while losing by 4.80 percent or 66 kobo to end at N13.09 from N13.75 recorded the previous month.

With a market price of N19.99 at a turnover of 7.991 million units valued at N162.5million which exchanged hands in 266 deals the stock closed the market on April 27, 2007.

The company, last week submitted its financial year ended December 31 results to the Nigerian Stock Exchange (NSE) which indicated a drop in its bottom line profit.

Analysing the result, it seem that the company may have surrendered to its competitors thereby losing more of its market, going by its N7.83 billion or 23.46 per cent plunge in sales volume. Turnover fell to N25.55 billion in the year 2006, as against the previous year’s N33.39 billion, just as the Robert Clarke-led management reported that the company swam into murky waters within the period with a loss after tax of N2.46 billion. In the year ended December 31, 2005, Unilever Nigeria posted a profit before tax of N2.28 billion.

Loss attributable to shareholders stood at N664.95 million, as against a profit after tax of N1.61 billion reported at the end of the previous year.

Most market watchers expressed fear going by the dwindling form the company degenerated to. For example, Unilever Nigeria reported a 31.18 per cent slump in its third quarter turnover, which stood at N16.93 billion from N24.60 billion in 2005. Also, the company reported a 265.52 per cent drop in net profits to a loss after tax of N2.40 billion from N1.45 billion.

According to management, Unilever’s problems began in the 2005 financial year when inadvertent bans on importation of key raw materials led to frequent supply disruptions. This was followed by dramatic changes in import duties with the overall impact causing costs to increase faster than income. The credit squeeze caused by the banking sector consolidation that ended in 2005 affected the company adversely, as it impacted local suppliers and key distributors. "Liquidity became the issue as distributors’ reduced ability to borrow and to sell out led to increased levels of inventory and debt. During this period, Unilever supported its distributors by extending additional credit which resulted in higher debtors and borrowings. At the end of the year, Unilever’s receivables grew by 258.0 percent to N9.4 billion while overdrafts increased by 354.8 percent to N8.6 billion," explains one analyst in his report.

The effect of the appointment of Bob Clarke who resumed on October 1, last year, to drive the restructuring of the company’s sliding fortunes is yet to be felt, going by the recent result. At the close of trading on Tuesday, the share price of Unilever Nigeria appreciated by 10 kobo, closing at N13.50.

Market capitalization took a N51.95 billion plunge at the close of trading on Tuesday at N5.757 trillion, just as the All-Share-Index at 40,663.76 points caved in by 366.94 basis points or 0.89 per cent, after Nestle Nigeria led others including Ecobank Transnational Incorporated, Benue Cement Company and 7-Up Bottling Company, among others on the laggards side.

Nestle lost by heavier N15.75 than Monday’s 992 kobo, both of which brings its cumulative loss since last week to N46.96. ETI dropped 600 kobo; BCC shed 251 kobo; 7-Up, 245 kobo; African Petroleum, 200 kobo; and UACN, 150 kobo. First Bank closed 140 kobo slimmer; West Africa Portland Company, 121 kobo; Flour Mills, 101 kobo; Cadbury Nigeria and Oando, 100 kobo; Nigerian Aviation Handling Company, 91 kobo; Guinness Nigeria, 85 kobo; Glaxosmithkline Consumer and Nigerian Breweries, 80 kobo; Union Dicon Salt, 72 kobo; Chevron Oil, 50 kobo; and IBTC-Chartered Bank, 49 kobo.

On the gainers’ side Total Nigeria took the lead, adding 200 kobo to Monday’s 198 kobo; followed by CAP’s 143 kobo; RT Briscoe chalked 134 kobo; and Cement Company of Northern Nigeria, 130 kobo. Dangote Sugar Refinery added 104 kobo, closing at N21.87; followed by Mobil Oil’s 100 kobo; Nigerian Bottling Company recovered 90 kobo from its 150 kobo loss on Monday; just as Cappa & D’Alberto grabbed 60 kobo. UACN Property Development Company lost 57 kobo and Nigerian-German Chemicals, 47 kobo.

Transaction volume fell by 57.68 million shares or 13.85 per cent as stockbrokers crossed 358.70 million units worth N3.96 billion in 9,678 deals, as against Monday’s 416.38 million shares valued at N3.82 billion in 9,065 deals.

Diamond Bank was the most active stock in the banking sub-sector, where 181.43 million units were traded for N2.67 billion in 5,225 deals. Diamond Bank’s 35.75 million shares changed hands for N382.59 million units in 37 deals, while investors staked N159.31 million for 31.63 million units of Fidelity Bank in 680 deals. In 675 deals, 25.00 million units of Guaranty Trust Bank were exchanged for N854.24 million, just as 18.67 million units of First City Monument Bank were traded in 349 deals for N157.74 million.

In the insurance sub-sector where 76.51 million units valued at N190.56 million in 823 deals, Mutual Benefits Assurance was the most sought after, with 40.02 million shares worth N72.84 million in 60 deals. In 287 deals, 15.66 million units Cornerstone Insurance were traded for N44.54 million in 287 deals.

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