Unilever Pakistan: the growth story continues

Taking home Rs5.4 billion in PAT at the end of CY12, Unilever Pakistan once again leads the pack of high-volume, high-growth consumer goods giants that are racing ahead despite the persistently tough operational climate in the country.
However the growth in the firms top line at 15 percent remains the lowest that it has posted in the last three years.
At the nine-month mark, the turnover for the Companys mature products in categories including home and personal care (HPC), and beverages remained lackadaisical, growing by three percent year-on-year as the younger, marketing-savvy competitors like Engro continue to steal their thunder.
The year saw the Government reduce tax levies on tea, which was widely hailed as an attempt to provide a level playing field for packaged tea sellers. Consequently the benefits were passed on to customers in the shape of lower prices which spiked sales for Unilevers teas towards the end of the year.
Additionally, the removal of Federal Excise Duty on shampoos and creams also provided cushion to the otherwise lackluster sales of HPC during the year.
Trickling down into a 1.41 percentage point improvement in margins for the year, the Companys measures to improve operational efficiencies saw costs remain largely under control for the outgoing year.
However, with the countrys economic and political clime meriting a greater investment into supply chain improvements, Unilever will greatly benefit from improvements in their inventory management which will cushion the giant against supply volatilities such as those that arose in 2012.
With profit earned from disposal of fixed assets and reversals of restructuring charges from CY11 coming in tandem with better cost control, the Companys bottom line in comparison to the top line rose by a sharper 34 percent during the year.
Distributional expenses for the firm during the year, jumped by 13 percent compared to the previous year, remaining largely in line with inflation. The year saw the Company add to its detergents category by the introduction of Sunlight washing powder- a fragranced detergent- for which a lengthy promotional campaign was run over the course of the year in addition to other regular campaigns.
In November, the firms announcement of voluntary delisting was met with much speculation, raising concern about the already scanty representation of the consumer goods sector on the local bourses.
While the said delisting may mean that the results for CY12 are amongst the last to be made public, the overall sentiment remains that the delisting will not have any lasting unhealthy impact on the broader market.
One of the most important emerging markets for consumer goods, Pakistan has the potential to become a haven for big name food manufacturers who are spurred on by the increasing income at the dispense of the growing middle class.
But with the number of players in the game increasing, the companies that attract the largest pieces of the pie remain those which have been consistently engaging in intelligent product line expansions and out-of-the-box market development strategies.
Unilever Pakistan, which retains the largest market share in a number of product categories as of now is definitely in need of breathing new life into a number of existing product categories such as spreads and ice cream. Also, the addition of new brands and innovative categories to the product mix will also bode well for the giant.

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Unilever Pakistan Ltd.

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Rs (mn)                                   CY11      CY12    % chg

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Sales                                   51,876    59,741    15.2%

Cost of sales                           33,792    38,071    12.7%

Gross profit                            18,084    21,670    19.8%

Gross profit margin                     34.86%    36.27%        -

Distribution and other selling expense   9,807    11,149    13.7%

Administrative expenses                  1,629     1,989    22.1%

Finance cost                               225       430    91.1%

Profit from operations                   6,150     8,478    37.9%

NPAT                                     4,094     5,491    34.1%

Earning per share (Rs)                     308       413    34.1%

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Source: KSE notice