Unilever Pakistan began its operations in 1948 and it is the largest fast-moving consumer goods (FMCG) manufacturing company in Pakistan. Unilever owns 70.4 percent stake in Unilever Pakistan. The company operates through five regional offices, four wholly owned and six third-party manufacturing sites across the country.
Since its establishment in 1948, the company has been growing by leaps and bounds, catering to fast-growing consumption needs of the country's booming population. At present, Unilever Pakistan commands significant market share in its core 'Home and Personal Care' business as well as in the 'Foods' business. Prominent brands owned by the company include Walls, Blue Band, Brooke Bond, Clear, Close up, Surf Excel, Fair & Lovely, Lifebuoy, Lux, Rin, Rexona, Sunsilk, Lipton and Pearl Dust, etc.
FINANCIAL ANALYSIS OF UNILEVER PAKISTAN LIMITED
Profitability Even though the tea business, that represented 30.6 percent of this company's total turnover in FY09, suffered owing to rampant smuggling of tea into the country through Afghanistan; the company experienced 23.4 percent growth in total sales resulting in an increase in its profit after tax by 54 percent in FY09 when compared with results for FY08.
The company is able to double its profit and turnover through improved consumer connectivity, better advertising and continued focus on consumer value during times when soaring inflation has taken a bite out of real disposable incomes. Home & Personal Care (HPC) grew by 27 percent in FY09 compared to FY08. The beverages business of the company registered a turnover growth of 21.9 percent in FY09 on the back of higher prices but lower volume. Sharply higher raw-tea costs also resulted in reduced margins. Ice cream turnover grew by 8.9 percent, even with power cuts and an unfavourable economic and security environment.
Despite rising inflation, low GDP growth, regular power outages and poor security environment, the company has managed to register robust top-line growth of 17 percent in FY10, compared with the same period of last year. HPC continued to deliver robust double-digit sales growth in FY10, on the back of strong volume and share gains in key categories. Despite frequent power outages the ice cream business achieved 33 percent growth in FY10; virtually all of which was generated through higher volumes. During the same year, the spreads business achieved double-digit volume-led growth of 20.2 percent, as a result of improved visibility, penetration, trial and promotional campaigns.
Rising input costs that were not entirely passed on to consumers and strategic investment behind brands impacted EBIT ratio by 5.7 percent in FY10 compared with FY09. Strong volume and value growth resulted in an increase of 7.1 percent in net profit for FY10 compared with FY09.
The first half of FY11 has shown significant improvement in results compared with the same period last year. Smuggled tea, power outages and constrained disposable income affected the company's turnover and post-tax profits. Despite these constraints, after-tax earnings increased by 29 percent whereas turnover grew by 15.3 percent compared with the same period of last year. The reason for this lies in the company's efforts to improve distribution along with the introduction of new products.
Additionally, profit after tax also benefited from lower financial charge stemming from further optimisation of working capital. Input costs in the first six months of FY11 continued to increase on the back of rising commodity costs. But the company's profits benefited from improved scale as well as through the timely passing on of cost increases to consumers.
Liquidity The strong current ratio value since 2008 reflects the company's ability to manage its working capital cycle efficiently. This ratio improved from 0.7 in FY08 to 0.8 in FY09, while it remained unchanged at this level in FY10.
Debt Management The total debt ratio of the company has fallen from 0.3 percent in FY08 to 0.01 in FY10. This reflects the strong equity position of the company. A decline in the debt-to-equity ratio from 0.6 in FY08 to nil in FY10 reflects that the company has been financing its growth with sources other than debt.
Operational Efficiency Improvement of 29 percent in the fixed asset turnover ratio over three years since 2008 suggests that the company has been able to improve its ability to turn its assets into revenue.
Market Value Better profitability led to an increase of 54 percent in the company's earnings per share in FY09 compared against the EPS in FY08. Improved volume and value growth led to a 7.9 percent increase in EPS in FY09 compared with the previous fiscal year. In short, the company's EPS has roughly doubled over three years leading to the outgoing fiscal year.
Prospects Unilever Pakistan has observed stellar growth in sales of most of its product lines. Feeding the needs of an ever-increasing population which is warming up to a culture of consumerism and the use of packaged goods, puts the company in a comfortable position to continue reaping benefits in the future.
However, there are some challenges that the company faces in the form of energy shortages and the rising cost of power in the country. In addition to this, the sale of tea which is a major volume driver for the company has been hampered by rampant smuggling of tea into the country via Afghanistan.
The dismal law-and-order situation and economic slowdown have also restrained disposable incomes for the public at large. This has in turn suppressed the potential growth in consumer sales in the country. Still the company has managed to register stellar growth in its sales and profits and appears well placed to continue riding this wave of success in coming years.
All information and data used are from reliable source(s) and subjected to extensive research after diligent and reasonable efforts to determine the soundness of the source(s). This analysis is not for the benefit of or discredit to any person, scrip or tradable instrument. The content(s) of this analysis shall not be construed as an advice or recommendation to trade. No relationship of client will be created between Business Recorder and user of this information. Professional advice must be taken by the reader before making investment/trading decisions. BR disclaims any liability for investment(s) made or liability accrued on basis of this analysis. The content(s) including all opinion(s), statement(s) and information are subject to change without prior notice and/or intimation.