UNILEVER NIGERIA'S 2016 LEVER

Left to core business alone especially as influenced by higher production cost in a receding economy, Unilever Nigeria had no way to escape end 2016 with lower profits but it not only escaped, it more than doubled 2015 profit.

The secret lever that did the trick came in four different forms: Hands on grip on overheads; profit from sale of consumables; lower cost of funds and higher finance income.

According to the figures released recently, Unilever's 17.8% increase in core business revenue to N69777.1m was wiped out almost immediately by 29.6% leap in cost of producing the goods sold to N49481m.

Hence, inspire of the double digit revenue growth, gross profit shrunk by 3.57% to N20296m.

In response, the first lever Unilever Nigeria successfully leaned on was good hands on that resulted not only in 16% drop in marketing and administration cost to N11,464.1m but also in absorbable 10.8% increase in selling and distribution expenses to N3151.1m.

Then as partial icing on this, Other income rose by 60.3% to N124.2 as boosted by N116m profit realised from sale of raw materials.

Thus, inspite of the shaky foundation offered by gross profit figures, operating profit ended up rising by 25.1% to N5805m, as if by a miracle.

The fourth leverage turned out to be more like the real miracle: Finance income hit N1027.6m mainly as forex gain rose by 884.9% to  N623m; and interest income from call deposits and loans to employees.

Finance expense too took a dive as interest paid dropped by 11.4% and loss recorded from foreign exchange related transactions decreased by 93.4% .

The interest paid bit was as the company reduced more costly overdraft to zero and topped less costly borrowings to N20501.3m compared to N7426.5m in 2015.

Hence it ended the year with not only more than doubled profit but also with working capital deficit down to N11970.9m and profit margin of 4.23% as against 2% in 2015.

UNILEVER NIGERIA: Nm Full year
                             2016.          2015
Total income   72627.5.   59601.1
Core revenue   69777.1.   59221.7
Cost of sale.    49481.0.   38174.2
Gross profit     20296.0.   21047.5
Selling distr.       3151.1.     2844.1 
Marketing etc 11464.1.   13641.2
Other income.     124.2         77.5
Operating profit 5805.0.   4639.7
Finance income 1027.6.     301.9
Finance cost       2726.2.  3170.5
Profit b4 tax.       3071.9.   1192.4
Margin %                4.23         2.00
Working capital (11970.9)(13689.9)
Overdraft.              -               4535.7
Borrowings.        20501.3   7426.5

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