Unilever Nigeria Plc – Tight credit terms and lockdown woes derail performance

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Unilever Nigeria Plc – Tight credit terms and lockdown woes derail performance

Recently, Unilever Nigeria Plc (UNILEVER) published its unaudited H1- 2020 financial result. According to the report, Revenue sharply declined by 35.9%y/y to N27.3bn, amid the continued negative impact of the management’s decision to tighten credit terms since H2-2019, on the y/y volume growth.

Overall, the company recorded a loss before and after-tax of N566.8mn and N519.1mn respectively (vs.Profit before and after-tax of N4.7bn and N3.5bn respectively in H1-2019).

Below, we update our model estimates for UNILEVER, based on the recently published numbers and reassess our expectations for the rest of the year.

An underwhelming H1-2020 performance:

UNILEVER’s revenue declined in both Q2-2020 and H1-2020 by 40.2% y/y and 35.9%y/y respectively.

Beyond the obvious challenging operating conditions that characterized the period, amid lockdown in the two states where the company’s factories are located (Lagos and Ogun state) in April and May-2020, we believe the management’s decision to tighten credit terms since H2-2019, to address rising trade receivables and excess stock-in-trade, remains a key driver of the sharp decline in revenue.

As expected, the more essential Food segment (-28.5%y/y to N15.3bn) performed relatively better than the Home and Personal Care (HPC) segment (-43.3% to N12.1bn). Overall, competition in the trading environment remained intense, during the period amid declining purchasing power.

Elsewhere, Cost of Sales sharply declined by 32.4%y/y to N21.2bn, thanks to lower commodity prices induced by the COVID-19 pandemic as well as weaker production activity on the back of weaker demand.

Notably, Gross Margin mildly declined to 22.5% (vs. 26.6% in H1-2019), dragged by the steeper decline in Revenue (-35.9% y/y) relative to Cost of Sales (-32.4%y/y).

Additionally, Operating Expenses (OPEX) rose by 1.2%y/y to N7.6bn, spurred by c. 2.0x increase in impairment losses on trade receivables while Operating Loss came in at -N1.4bn (vs N3.9bn profit in H1-2019).

The bottom-line number received less support from Net Finance Income, which remained flat at N844.2bn, as Finance Income (-29.3% to N849.3mn) fell at a relatively slower pace to Finance Cost (-98.6%y/y to N5.2mn).

Also, the company recorded a Loss before and after tax of N566.8mn and N519.1mn respectively (vs. Profit before and after-tax of N4.7bn and N3.5bn respectively in H1-2019).

Working capital management spurs healthy cash positions

The management’s strategic decision to tighten trade credit terms with trading partners led to 47.6% YTD decline in net trade receivables balance. However, Trade and Other Receivables declined at a slower pace, down 15.8%ytd to N20.3bn.

Also, inventory sitting on the balance sheet declined by 17.1% YTD to N9.8bn due to management’s strategy on working capital management as well as the impact of COVID-19 on material sourcing.

Meanwhile, Trade and Other Payables increased by 8.4%ytd to N37.6bn. Consequently, Operating cash flow improved from -N16.04bn in H1-2019 to N9.2bn in H1-2020. Also, its current ratio remained healthy at 2.0x, though marginally lower when compared to FY- 2019’s 2.1x.

With this performance, UNILEVER continues to sit on an increasingly higher cash balance (now at N44.6bn) compared to peers and relatively debt-free balance sheet (debt/ equity down from 1.1% in FY-2019 to 0.7% in H1-2020).

At this stage, the strategic intent of the company is unclear as management significantly slowed down on capital expenditure (-84.3%y/y to N427.2mn) in H1-2020.

H1-2020 as worst as it gets for 2020

Clearly, the H1-2020 outcomes reflected management’s decision in H2-2019 to tighten terms around credit sales as well as the operational challenges due to restriction in movements across states in Q2-2020.

Although the company was able to carry on partial operations on the basis of the essential nature of its products for personal and home hygiene, operations were carried out under extreme conditions with epileptic support from partners in its value chain, which do not necessarily fall within the government exemptions.

Looking ahead, we expect Revenue in H2-2020 to reflect the recovery in the operating environment as lockdowns are being lifted across states. Also, our optimism is buttressed by the lower base effect in Q3-2019 (when the management implemented the restriction in credit lines) and Q4-2019.

However, dwindling consumer income and intense competitive pressure are likely to constrain overall Revenue growth in H2-2020E. Also, margins and profitability are likely to remain depressed through H2-2020E, due to pressure on consumer spending.

Financial Highlights (N’Mn)

United Capital Research

Employment Landscape Transformed as Millions of Employees Want to Work from Home Forever

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Employment Landscape Transformed as Millions of Employees Want to Work from Home Forever

Widespread home-based working will result in the elimination of billions of commuter journeys and a decline in office-based working environments of 22%, according to a new study by Strategy Analytics.

The analysis is based on the emergence of four new employee groups in the post-pandemic employment landscape:

  • City Escapees account for 24% of workers: they love working from home (WFH) and half want to continue forever
  • Family Jugglers account for 30% of workers and are less keen on WFH
  • Struggling Commuters account for 37% and are lower-income employees in retailing, health and manufacturing who are unlikely to WFH in future
  • Teleworking Lifers have always been WFH and account for 9% of workers.

The complimentary report, After the Pandemic: Scaling the Impact of Sustained Working from Home Behaviors, is based on 9000 online interviews across the US, Germany and the UK carried out in March, April and May.

Photo by Chris Montgomery

In its Base forecast scenario, the report predicts that the number of people working from home in the longer term could increase by up to 300% relative to pre-pandemic levels.

A shift of this magnitude would have major implications for transport and other sectors, with billions of commuting journeys eliminated every year.

Many employers are reviewing their WFH policies but the research makes it clear that a significant proportion of employees, particularly those previously based in offices, would be happy to continue working from home permanently.

WFH does present problems of isolation and difficulties in communications for some employees, but these issues are not considered as important as the benefits.

“Employees have spoken – the ball is now in employers’ court,” says David Mercer, VP and Principal Analyst and the report’s author. “During the pandemic, people have enjoyed not commuting more than any other aspect of working from home; many would be delighted to continue if their employer allowed it.”

The report identifies a number of additional topics which require further exploration, including:

  • To what extent do employees desire or need to be in the office regularly for social interaction?
  • Which products and services will help to alleviate the major WFH concern – isolation – and which business models will offer the greatest returns?
  • To what extent will increase WFH accelerate changes in mobility behaviour such as declining or increasing personal vehicle ownership and reduced public transport usage?

Detailed findings from the study will be presented in a webinar at 16:00 UTC on 12th August. Registration details here.

Sterling Bank Plc Board Meets July 29, Declares Closed Period

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Sterling Bank Plc Board Meets July 29, Declares Closed Period

Sterling Bank Plc wishes to notify The Nigerian Stock Exchange and its shareholders that a meeting of the Board of Directors of the Bank will be held in Lagos on Wednesday, 29th July 2020 at 10.00 am to consider the Bank’s Unaudited Financial Statements for the period ended 30th June 2020.

The Bank had declared a closed period for trading in its shares from 18th July 2020 until 24 hours after the Unaudited Financial Statements for the period ended 30th June 2020 are released on the floor of The Exchange.

Consequently, Directors and other insiders of Sterling Bank are restricted from dealing in the securities of the Bank during the closed period.

Mazda to Resume Full Factory Operation Worldwide in August

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Mazda to Resume Full Factory Operation Worldwide in August

Starting in August, Mazda Motor Corporation will return to normal factory operations, or pre-COVID-19 levels, amid increased sales and future forecast for product demand in the U.S.

In June, Mazda North American Operations achieved a sales increase of nearly 11 percent year-over-year. Most notably, the three-row CX-9 and MX-5 roadster volumes grew approximately 50 percent and 25 percent, respectively.

Photo by Samuele Errico Piccarini

Through the remainder of July, Mazda will end production adjustments implemented at plants in Japan, Mexico and Thailand caused by the pandemic. Mazda has been monitoring inventory levels and modifying production since the end of March. Currently, almost all dealerships worldwide have resumed sale operations.

Globally, Mazda remains cautious and flexible regarding the risk posed by COVID-19 and will closely monitor trends and demand in each market where Mazda vehicles are shipped.

Mazda North American Operations is headquartered in Irvine, California, and oversees the sales, marketing, parts and customer service support of Mazda vehicles in the United States and Mexico through approximately 620 dealers. Operations in Mexico are managed by Mazda Motor de Mexico in Mexico City.

LASUBEB Partners Microsoft for Virtual Training of over 12,000 Public Primary School Teachers

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LASUBEB Partners Microsoft for Virtual Training of over 12,000 Public Primary School Teachers

The Lagos State Universal Basic Education Board, LASUBEB, has commenced a 10-day digital literacy training programme facilitated by Microsoft in partnership with ATB Technosoft Solutions for over 12,000 Primary School Teachers across the State.

The Chairman of LASUBEB, Mr. Wahab Alawiye-King disclosed this on Tuesday when he addressed participants at the commencement of the digital training held virtually.
He said that the training is an extension of the remote learning scheme put in place to ensure that whilst school pupils are learning at home through the various remote platforms, the teachers should also prepare themselves for increased efficiency through career capacity training, in order to adapt to new but relevant technological methods.
While emphasising the importance of technology to learning, the LASUBEB Chairman stated that its relevance has become more pronounced with the outbreak of the Coronavirus pandemic which has changed the ways of doing things globally.
In his words, “There are projections that the future of learning is digital. We do not want our system to be backward when other climes are living the true definition of the 21st-century. Hence, the importance of this capacity-building exercise to ensure that our teachers are global citizens, who are globally competitive and possess requisite skills to provide the quality education that this age demands”.
He noted that there are private actors willing to work hand-in-hand with the government to achieve quality and aIl-inclusive basic education in Lagos State, stressing that the Board appreciates the invaluable contributions of all its stakeholders towards the advancement of basic education and their sacrifices in these unprecedented times.
Describing teachers as life-long learners, Alawiye-King urged the beneficiaries of the training to continue to learn, unlearn and relearn in line with emerging trends to engender positive outcomes.
“Make good use of this opportunity towards bettering the future of our pupils and the advancement of your careers. Please listen attentively to the facilitators, I wish you all a productive learning experience”, the Chairman asserted.

Standard Chartered appoints Olukorede Adenowo as Executive Director

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Standard Chartered appoints Olukorede Adenowo as Executive Director

Standard Chartered Nigeria has announced the appointment of Olukorede Adenowo as Executive Director of Standard Chartered Bank Nigeria.

His appointment as Executive Director follows his recent appointment earlier in the year as Head of Corporate and Institutional Banking business in Nigeria where he is responsible for driving and implementing the Bank’s business strategy for its corporate clients.

Olukorede Adenowo as Executive Director, Standard Chartered Bank Nigeria | www.wordpress-1516176-5827464.cloudwaysapps.com

Profile of Olukorede Adenowo

Prior to his appointment, Olukorede Adenowo (K.O) was the Chief Executive Officer for Standard Chartered Bank (SCB) The Gambia with the dual responsibility of managing the Bank’s business interest in Senegal.

He has been a Non-Executive Director of SCB Sierra Leone from 2014 and also currently serves as a Non-Executive Director on the Board of Standard Chartered Bank Gambia.

K.O has a total of 33 years of post-university experience in banking, finance and consulting.

He was a founding staff of Standard Chartered Bank in Nigeria and has held various senior positions in Standard Chartered Bank Group in the last 21 years.

He has served as Head of Origination and Client Corporates for Standard Chartered Bank, West Africa; Deputy Managing Director of Standard Chartered Bank Cameroon and a senior management executive in the Wholesale Bank in Standard Chartered Bank Nigeria.

In his penultimate role as Africa Co-Head Financial Institutions and Public Sector business for SCB, K.O provided strong leadership in building and managing key strategic FI relationships across West Africa.

He worked closely with several Banks and Governments across the region i.e. Cameroon, Gabon, Senegal, Ghana, and most recently Nigeria in advising them on accessing international capital markets and ultimately improving the bank’s visibility in Public Sector for business success and growth in an increasingly stringent regulatory environment.

He was appointed the first Regional Head of Global Corporates for Standard Chartered Africa where he led the Africa Multinational business.

Prior to joining Standard Chartered Bank, KO worked in Societe Generale Bank Nigeria and Deloitte Nigeria, where he qualified as a Chartered Accountant in 1990.

An Economist turned Chartered Accountant; he was appointed Fellow of the Institute of Chartered Institute Accountants of Nigeria in 2000.

He is an alumnus of INSEAD and Said Business School of Oxford University where he had management training in Leadership and holds an MBA from the Lagos Business School.

He is married to Olajumoke and both have two children.

Insider Dealings: Sterling Bank Discloses 18,896,605 Shares Purchased by 4 Directors

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Insider Dealings: Sterling Bank Discloses 18,896,605 Shares Purchased by 4 Directors

The Sterling Bank Plc on, Tuesday, disclosed insider dealings of 18,896,605 shares acquired by four of the company’s Executive Directors between July 13 and 16, 2020.

In a statement signed by the Company Secretary, Temitayo Adegoke, Sterling Bank released through the Nigerian Stock Exchange, the lender said four Executive Directors bought the shares through the Nigerian Stock Exchange platform-X-STREAM.

Details of the transactions

Mr. Yemi Odubiyi

An Executive Director of the company, bought 7,128,882 shares of Sterling Bank at N1.24 a unit on July 15, 2020.

Mr. Raheem Owodeyi

Another Executive Director purchased 2,121,258 shares of the company at N1.24 per unit on July 16, 2020.

Mr. Emmanuel Emefienim

The Executive Director bought Sterling Bank’s shares of 8,368,688 units and N1.25 per share on July 14, 2020.

Mr. Tunde Adeola

Mr. Tunde Adeola, Executive Director, purchased 1,277,777 shares at N1.25 per unit on July 13, 2020, through the Nigerian Stock Exchange platform- X-STREAM.

Earlier, Brand Spur reported Mr. Abubakar Suleiman, Managing Director of the Bank, insider dealing of 18,457,500 shares at N1.24 per share from the company on July 16, 2020.

Insider Dealing: Tony Elumelu Purchases Additional 6.98m UBA Shares

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Insider Dealing: Tony Elumelu Purchases Additional 6.98m UBA Shares

Tony Elumelu, Chairman of United Bank for Africa Plc, acquired an additional 6,980,426 Shares of the Bank on Tuesday, a day after he purchased 62,643,500 shares in accordance with the new Nigerian Stock Exchange policy on insider dealing.

This brings the total of shares purchased to 69,623,927 by the Chairman in the month of July alone.

In a statement released through the Nigerian Stock Exchange and signed by Company Group Secretary, Bili A. Odum, the Bank said Elumelu purchased the additional shares at N6.15 per share and another 62,643,500 shares at N6.20 per share.

Further information revealed Tony Elumelu bought 69,623,927 ordinary shares valued at N431,319,326.05 between July 20 and 21, 2020 from the Nigerian Stock Exchange in Lagos.

See below for more information:

Oyo Approves Issuance of N100 Billion Private Bond for Circular Road, Iseyin-Ogbomoso Road, Ibadan Airport Expansion

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Oyo Approves Issuance of N100 Billion Private Bond for Circular Road, Iseyin-Ogbomoso Road, Ibadan Airport Expansion

…Bond to Take Care of Construction and Upgrade of Hospitals, Ibadan Dry Port and Rail Corridor Development – Commissioner

The Oyo State Executive Council on Tuesday approved the issuance of a N100 billion private bond tagged “Oyo Prosperity Bond” to facilitate the execution of priority projects that will further drive economic development in the State.
This was disclosed in Ibadan by the Commissioner for Information, Culture and Tourism, Dr Wasiu Olatubosun, after the State’s weekly Executive Council’s virtual meeting.
Oyo State Governor, Seyi Makinde
Olatubosun disclosed that the fund would be raised in two tranches of N50 billion each for the construction of the 50-kilometre Iseyin-Ogbomoso road, the Ibadan Circular Ring-Road and Ibadan Airport upgrade.

The fund will also covered the development of Ibadan Dry Port and rail corridor that he said would serve as economic hubs of the State.

The Commissioner stated further that the State would construct and upgrade, with modern equipment, one Government hospital in each of the three senatorial districts of the State.

In addition, the 21-kilometre Airport – Ajia – New Ife Express Road with a spur to Amuloko in Ibadan would also benefit from the alternative project funding approach of the State Government.

According to the Dr Olatubosun, “considering the infrastructural needs of Oyo State to enhance its economic potentials, the State Government has approved the issuance of private bond tagged “Oyo Prosperity Bond” to facilitate the execution of priority projects with a view to raising one hundred billion Naira (N100bn), which is to be raised in two tranches of fifty Billion Naira (N50bn) each.”

“The State Government has approved Oyo State Prosperity Bond to allow for quick completion of these iconic priority projects. The construction of Iseyin – Ogbomoso Road is very important because when completed, it will serve as a link road and help to save many hours spent on travelling and the lives of commuters, who daily experience vehicular accidents on various roads that link the already dilapidated Ogbomoso Road.”

The Commissioner hinted that the 21-kilometre Airport – Ajia – New Ife Express Road with a spur to Amuloko would be executed by Messrs Peculiar Ultimate Concerns Ltd at a total cost of Eight Billion, Five Hundred and Twenty Million, Nine Hundred and Nineteen Thousand, Seven Hundred and Seventy-Six Naira, Forty-One Kobo (N8,520,919,776.41).

The project funding, Wasiu explained, would be in the form of Alternative Project Funding Approach (APFA), which allows for Public-Private Partnership for funding of infrastructural projects in the State.

“With this approach in place, there will be the transfer of projects’ risk to the private entity while the hassle of debt management office (DMO) approval would be avoided and the quality delivery, as well as quick completion of the project, would be ascertained,” Olatubosun said.

Meanwhile, the Oyo State Executive Council has also approved the establishment of the Oyo State Development Agency for Socio-Economic Advancement (OYODASA) to give room for the residents of the State to have a better understanding of Government’s goals and help establish a shared vision between communities within the State and the State administration.

Dr Olatubosun said the purpose of the agency was to booster participation in Governance at the grassroots levels, adding that the Government would establish offices for the agency in seven zones and in all the Local Government Areas of the State.

“The agency will ensure Government’s programmes and policies are better understood by the general public, mobilise favourable opinions for such programmes and policies, encourage informal education through public enlightenment activities and publications, and establish an appropriate framework for educating and orientating residents of the State towards developing socially desirable attitudes, values and cultures.

“It will also encourage the people to take part actively and freely in discussions and decisions affecting their general welfare while promoting new sets of attitude and culture for the attainment of the goals and objectives of the State.

“OYODASA will work to instil in the populace, a sense of loyalty to their fatherland, ensure and uphold leadership by example and foster respect for constituted authority,” he explained.

Lagos to Empower 2,743 Farmers in Its Agriculture Program (Photos)

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Lagos to Empower 2,743 Farmers in Its Agriculture Program (Photos)

No fewer than 2,743 farmers in Lagos State would next week Tuesday receive inputs and productive assets under the State Government 2020 Agricultural Value Chains Empowerment Program.

The State Acting Commissioner for Agriculture, Ms. Abisola Olusanya, who disclosed this today in Lagos, explained that farmers, agro-processors, fishermen, butchers and marketers would all benefit from the empowerment programme as productive assets peculiar to all the agricultural value chains would be made available to them at no cost.
According to her, the Agricultural Value Chains Empowerment Programme has been designed as a means of channelling the needed support to small-holder farmers who are actively engaged in the various Agricultural Value Chains, thereby creating further wealth and job opportunities in farming communities.
Olusanya explained that the aim of the empowerment programme was to provide the necessary inputs and assets needed by farmers to improve food production in the State in an effort targeted towards increasing the State’s self-sufficiency to 40% of food needs by 2023.
“The overall aim of the Agricultural Value Chains Empowerment Programme is to provide the necessary agricultural inputs and productive assets to farmers as a means of achieving improved food production and supply as well as delivering optimum economic benefits to farmers and other operators”, she averred.
The Acting Commissioner expressed hope that the Empowerment Programme would significantly improve the standard of living of farmers, fishermen, marketers, butchers, and agro-processors in the State through the expansion of their food production activities.
She pointed out that the Programme was targeted at farmers who would be the direct beneficiaries, as well as service providers, transporters, input manufacturers and suppliers within the system whose services would be required for the successful implementation of the project.
“The Empowerment Programme would further contribute to the achievement of the vision of ‘Making Lagos a 21st Century Economy’ and also the attainment of United Nations’ Sustainable Development Goals 1, 2, 5, 8, 10, 12, 13, 14, 15 and 17 of no poverty, zero hunger, gender equality, decent work and economic growth, reduced inequality, responsible consumption and production, climate action, life below water, life on land as well as partnership to achieve the goal would be met”, she asserted.
Olusanya noted that since the inception of the Empowerment Programme in 2014, a total of 11,233 farmers, fishermen, butchers, processors and marketers have been empowered, adding that as a result, food supply in Lagos has been raised from 18% in 2014 to 25% of total food demand in 2019.
According to her, only representatives of farmer’s Associations would receive the agricultural inputs on behalf of members of their Associations at the event in order to accommodate the physical distancing rule of the State Government.
“The implementation of this Programme, in view of the COVID-19 Pandemic and the social distancing regulations recommended by Government to control the spread of the disease, informed our decision to invite only representatives of farmers’ Associations to receive the agricultural inputs on behalf of members of their Associations at this event and thereafter input redemption by other beneficiaries will take place in three other centres at Agege, Ikorodu and Epe”, she revealed.
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