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Home » Unilever Faces Tough Quarter Amidst Inflation, Escalating Costs

Unilever Faces Tough Quarter Amidst Inflation, Escalating Costs

Justice Godfrey Okamgba by Justice Godfrey Okamgba
July 24, 2023
in Commerce
0
Unilever Faces Tough Quarter Amidst Inflation, Escalating Costs

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Unilever Nigeria Plc, one of the leading consumer goods companies in the country, has reported a challenging second quarter in 2023, marked by an operating loss of N3.2 billion.

This significant loss was attributed to escalating costs that outpaced revenues during the period under review.

The company’s financial performance was greatly impacted by the 22.79% surge in the inflation rate in June 2023, which resulted in rising costs of goods and services for businesses and consumers alike.

Despite these economic challenges, Unilever managed to record a 27.31% increase in revenue for the quarter, amounting to N29.60 billion compared to N23.25 billion in the same period the previous year.

This positive revenue growth was largely driven by the company’s main business segments, namely food products and home & personal care.

The food products segment delivered impressive revenue of N14.72 billion during the quarter, showing a substantial increase from N10.43 billion in the corresponding period last year.

Similarly, revenue from the home & personal care segment reached N14.88 billion, compared to N12.81 billion in the same period the previous year.

Despite the encouraging revenue figures, Unilever’s bottom line suffered significantly. The company’s pre-tax profits plunged by a staggering 72.95%, amounting to just N169.9 million.

The decline in profitability can be primarily attributed to the rising costs of sales, resulting from the company’s restructuring efforts, including writing off raw and packaging materials due to the stoppage of production in the home care category.

Additionally, redundancy costs associated with the restructuring further impacted the company’s financials.

The company’s cost of sales increased sharply to N27.11 billion from N16.22 billion in the same period last year, leading to a decline in gross profit from N7.03 billion to N2.49 billion.

The cash flow for the first half of 2023, which ended on June 30th, paints a more positive picture for Unilever Nigeria.

The company reported a cash flow of N82.73 billion, marking a robust 30.53% increase from N63.38 billion recorded in the same period the previous year.

Despite the challenges faced during the quarter, this increase in cash flow signals the company’s ability to manage its liquidity effectively.

Unilever Nigeria’s financial performance in the second quarter of 2023 reflects the wider economic challenges brought on by inflation and escalating costs.

The company’s revenue growth indicates its ability to withstand some of the headwinds, driven by successful performance in its main business segments.

However, the significant decline in pre-tax profits and the operating loss highlights the urgent need for cost management and restructuring measures to restore profitability and financial stability.

The company will likely be closely monitoring economic conditions and adapting its strategies to navigate through the uncertain business landscape effectively.

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  • Justice Godfrey Okamgba
    Justice Godfrey Okamgba

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