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Unilever Nigeria Plc: impressive 2022FY earnings growth, but the bear waits.

Unilever Nigeria on January 24, 2023, released its 2022 FY results, growing earnings by 771% to N5.992 billion from N688.266 million reported a year ago.

Consequently, the consumer goods producer’s earnings per share settled at N1.04 for the period as against 59 kobo reported in 2021, representing about 76% year-on-year growth.

A cursory review of the audited financial statements shows that the strong bottom line performance was supported by a well-managed production costs profile especially in the last quarter of the year, a spike in interest income, and marginal growth in revenue.

  • In Q4 2022, the cost of sales declined by about 31%, which moderated the cost of sales growth to 14% y/y (up N57.238 billion) amidst high inflation, energy supply chain disruptions, and other macroeconomic headwinds witnessed during the period under review.
  • Also, the consumer goods producer’s interest income on call deposits and bank accounts grew by about 79% year-on-year to N1.835 billion.
  • Its revenue increased by 25.8% in the financial year 2022 as prices of goods were adjusted upward, rising to N88.72 billion from N70.52 billion in 2021 FY

No doubt, the consumer goods producer has an impressive outing in 2022 FY in absolute and relative terms.

  • Over the past five years, the company recorded the highest quarterly earnings of over N6 billion in Q4 2022.
  • Earnings in 2022 FY (inclusive of earnings from discontinued operations) grew by 75% year-on-year without any income from discontinued operations, a development that helped its results in the financial year 2021.
  • Also, the 2022 impressive performance exceeded the company’s 5-year earnings growth of 3.90% per year. This means while the company’s earnings on average grew by 3.9% per year over the past five years (2017-2021), earnings grew by 771% over the year.

Probably due to the impressive results and in expectation of dividend declaration and payment, the company’s share price is uptick as value hunters begin to take a position.

  • Unilever closed its last trading day, Friday, January 27, 2023, at N13.25 per share on the NGX recording a 19.37% gain over the 2022FY pre-released closing date price of N11.10.
  • Unilever began the year with a share price of N11.60 and has since gained 14.2% YtD.

As exciting as the latest results look, unfortunately, the present may not reflect the future considering the past.

  • Over the past five years (2017-2021), the company’s earnings per share have declined on average by 10.78% per year.
  • Also, the company’s share lost 68% of its value between 2018 and 2021 and in the same trajectory recorded a 25% YtD loss in 2022.

Is it overvalued? At N1.04 EPS (TTM), the consumer goods producer is trading at a trailing twelve months price-to-earnings ratio of 12.74x, which is higher than its P/E (annual) ratio of 11.15x and about 0.03% higher than the NGX Index Industry ratio, which makes the stock at a current price more expensive relative to its 2022 closing price and the Industry average ratio.

  • PZ Cussons Nigeria, with N2.78 EPS (TTM) trades at around a P/E (TTM) ratio of 3.69x, much lower than Unilever’s 12.7x.
  • Also, its P/B (MRQ) ratio of 1.09x above 1x is an indication that the stock is overvalued.
  • The consumer goods producer’s share price also delivers a dividend yield of 3.77% and indicated gross yields of 3.82% based on its last reported dividend of N0.50 per share.
  • This is not notable and not in the top 25% of dividend payers in the NG market.



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