Unilever Nigeria Plc (NSE: UNILEVER) earlier today released its unaudited interim financial statements for the six months ended 30 June 2020. It was a grim result for the shareholders of the company, who made 98% of its revenue in Nigeria, from the sale of Foods (including tea and savoury) and Home & Personal Care (including sale of skin care and oral care products, fabric care and household cleaning).
In the three months of the second quarter, the company reported a revenue of N14.008 billion, a decline of 40.19% from the N23.421 billion reported in the same quarter of 2019. For the three months, the company reported a 181.92% decline in profit, from a profit after tax of N1.994 billion in the second quarter of 2019, to a loss of N1.633 billion for the same period in 2020.
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For the first half of the year, H1 2020, the company reported a revenue of N27.337 billion, a decline of 35.91% from the N42.657 billion reported in H1 2019. The income statement shows that the profit after tax declined by 114.77% from N3.514 billion recorded in H1 2019, to a loss of N519.112 million in H1 2020.
Despite the poor performance in terms of revenue and profit decline, the company’s balance sheet portrays a company with solid financial standing. The company’s N105.766 billion total asset as at 30th June 2020, was funded predominantly by the shareholders, 62.5% from the shareholders fund, and only 37.5% from liabilities.
Of the company’s total liability of N39.757 billion, loans and borrowings accounted for only N494.130 million, while trade and other payables accounted for the bulk of the liabilities; N37.624 billion.
Speaking about the impact of Covid-19, the company stated, “Countries of the world including Nigeria is constantly addressing the continued increase in recorded cases of COVID-19 and the implications to the economy.
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“COVID-19 is an evolving situation, the company is monitoring closely any material impact to the going concern of the business. Our priority is to protect the health, safety and welfare of our employees, customers, and partners, as well as support the Government and its agencies as they work to reduce the impact of the outbreak. At this stage, the company is unable to reliably estimate the future impact of COVID-19, given the lack of an indication of a possible end date of the pandemic or on how long it would continue to impact the Nigerian economy.
“However, the company is constantly monitoring through its instituted Incident Management Team (IMT) saddled with the responsibility to constantly access developing events, mitigate as much as possible negative impact and steer the organisation towards adapting to current realities.
UNILEVER is principally involved in the manufacture and marketing of foods and food ingredients, home and personal care products. It has manufacturing plants in Lagos and Agbara.
This bellwether stock on the Nigerian Stock Exchange has seen its shares eroded tremendous in recent years. It is down 41.59% YTD, down 75.29% in the past 2 years and down by 65.82% in the past 5 years.
We have a SELL recommendation on the stock with a fair value for its stock between N5.35 – N6.45 based on financial fillings and industry trend in recent years. If this performance persist in the 9 Months period ended 30th September, this hitherto unthinkable price might become a reality for UNILEVER, which was selling around N32.00 just 12 months ago.