Last Update30 Jul 25
📌 Subject: Unilever Nigeria Plc H1 2025 – Strong Earnings Rebound Fueled by Pricing Power and Efficiency
Unilever Nigeria Plc delivered a stellar earnings rebound in H1 2025, achieving a 224.6% YoY increase in profit after tax to ₦14.41 billion, driven by strategic pricing actions and improved cost discipline. Revenue surged by 53.5% YoY to ₦98.10 billion, thanks to price hikes implemented between H2 2024 and Q1 2025 and a modest recovery in volume growth. This reflects the company’s brand strength and effective market penetration amid persistent inflation and changing consumer dynamics.
Catalysts
- Strategic Price Increases: Between late 2024 and early 2025, Unilever implemented targeted price hikes. Despite a challenging macroeconomic environment, the company maintained volume stability—indicating strong brand loyalty and inelastic demand for its products.
- Margin Expansion: Gross profit improved meaningfully as cost of sales grew slower (48.5%) than revenue (53.5%), boosting gross margins. With operating expenses rising modestly by 21.9%, operating leverage kicked in, fueling bottom-line growth.
- Dividend Payout: The interim dividend of ₦0.50 per share (vs. ₦0.00 in H1 2024) signals confidence in cash generation and sustainable earnings.
- Improving Macros: A disinflation trend and relative currency stability in Nigeria provide a favorable backdrop for consumer spending recovery and input cost moderation in H2 2025.
📈 Assumptions
- Revenue Outlook: Assuming annual revenue grows at a conservative CAGR of 15%, driven by moderate volume recovery and strategic price adjustments, Unilever Nigeria could surpass ₦200 billion in revenue by 2029.
- Earnings Projection: With sustained gross margin expansion, disciplined cost control, and moderate finance costs, net margins could rise to 12–15% in 5 years. This implies net income of ₦24–₦30 billion by 2029, up from ₦14.4 billion in H1 2025.
⚠️ Risks
- Consumer Sensitivity: While recent price hikes were absorbed, future increases may trigger volume declines if inflation flares up or if competition intensifies.
- Raw Material Costs: Unilever is exposed to imported input cost risks. Any resurgence in naira depreciation or global commodity price spikes could pressure margins.
- Rising Finance Costs: Finance costs rose 89% YoY due to increased borrowings. Sustained high interest rates could erode profit margins if leverage is not curtailed.
- Regulatory Risks: Potential price controls, FX restrictions, or tax policy changes could impact profitability.
💰 Valuation Outlook
- Short-Term (3 Years): With EPS at ₦2.51 in H1 2025, full-year EPS could hit ₦5.00+. At a conservative P/E of 15x, the stock could trade around ₦75 per share, up from current levels.
- Mid-Term (5 Years): If Unilever sustains earnings growth of ~15% CAGR and improves margins, a P/E re-rating to 18–20x could drive the stock to ₦90–₦100/share, assuming earnings of ₦6.0–₦7.0.
- Long-Term (10 Years): With continued expansion, increased market penetration, and regional exports, Unilever Nigeria could evolve into a ₦300–₦350 billion market cap company, justifying a high-teens valuation multiple.
Strengths:
- Strong brand and pricing flexibility
- Solid margin expansion
- Interim dividend payout
- Cash-rich balance sheet
Weaknesses:
- Rising finance costs
- Foreign exchange exposure
- Dependency on consumer sentiment
Unilever Nigeria Plc has delivered an exceptional Q2 2025 performance, reflecting a well-executed turnaround strategy. Revenue surged by 62% year-on-year to ₦51.1 billion, while net profit skyrocketed to ₦8.85 billion, a massive leap from ₦1.08 billion in Q2 2024. This remarkable rebound follows deep structural changes in cost control and receivables management.
✅ Strengths
- Strong Revenue Growth: Revenue grew by ₦19.5 billion, a 62% YoY increase, driven by better market penetration, pricing strategies, and volume growth.
- Cost Management & Impairment Recovery: Gross margin improved significantly, aided by a ₦402.5 million reversal in receivables impairment, signaling improved credit quality and internal control.
- Impressive Operating Profit: Operating profit stood at ₦10.5 billion, a reversal from the prior year’s loss, highlighting operational efficiency.
- Healthy Cash Position: With ₦83.7 billion in cash and cash equivalents, the company is well-positioned to fund operations and investments without external financing pressure.
- Improved Earnings Power: EPS improved sharply to ₦1.54/share, from ₦0.19/share YoY – indicating superior returns to shareholders.
⚠️ Weaknesses & Risks
- Rising Operating Costs: Despite improvements, marketing and administrative expenses rose by over ₦3.2 billion (+37%), which may pressure margins if not managed going forward.
- Tax Expenses: A sharp rise in tax expense (₦4.5 billion vs. ₦842 million in Q2 2024) could affect net profitability if not offset by future tax credits or incentives.
- High Payables: Trade and other payables increased to ₦52.3 billion, potentially indicating delayed supplier payments or short-term working capital strain.
- Exposure to FX and Inflation: As a consumer goods company, Unilever remains vulnerable to FX volatility and inflation, which could affect input costs and pricing strategies.
📊 Valuation Insight & Outlook
Unilever’s net profit margin expanded substantially to ~17% (₦8.85bn/₦51.1bn), compared to ~3.4% in Q2 2024, indicating a leaner and more efficient structure. With strong consumer demand, robust cash reserves, and improving bottom-line, the company is poised for sustained earnings growth.
Rationale:
- Strong earnings recovery and operational turnaround
- Solid balance sheet with minimal debt risk
- Attractive EPS growth and profitability trajectory
- Well-positioned to benefit from Nigeria’s consumer market rebound
Target Investors: Growth and income-seeking investors looking for exposure to Nigeria’s FMCG sector with improving fundamentals.
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Disclaimer
The user WaneInvestmentHouse holds no position in NGSE:UNILEVER. Simply Wall St has no position in any of the companies mentioned. Simply Wall St may provide the securities issuer or related entities with website advertising services for a fee, on an arm's length basis. These relationships have no impact on the way we conduct our business, the content we host, or how our content is served to users. The author of this narrative is not affiliated with, nor authorised by Simply Wall St as a sub-authorised representative. This narrative is general in nature and explores scenarios and estimates created by the author. The narrative does not reflect the opinions of Simply Wall St, and the views expressed are the opinion of the author alone, acting on their own behalf. These scenarios are not indicative of the company's future performance and are exploratory in the ideas they cover. The fair value estimates are estimations only, and does not constitute a recommendation to buy or sell any stock, and they do not take account of your objectives, or your financial situation. Note that the author's analysis may not factor in the latest price-sensitive company announcements or qualitative material.