In 2015, Unilever’s revenue was GH¢518.7 million but dropped to GH¢496.3 million last year, “reflecting the complex and challenging environment in the country and the sub-region,” the company said in its yet-to-be audited results.

Despite the decline in revenue, the company’s net profit rose by 11.5 per cent to GH¢39.8 million within the 12-month period, thanks to a 5.8 per cent improvement in operating profit.

The decline in revenue combined with other factors to reduce the company’s dividend for the 2016 financial year to five pesewas from the 40 pesewas paid in the 2015 financial year

Beyond the decline in revenue impacting on the dividend, the Head of Research at FirstBanC Financial Services, Mr Ben Amoah-Adjei, said it could also be the result of the limited cash available to the company.

After selling a lot of its products to its sister companies in the sub-region on credit, Mr Amoah-Adjei said, the company was left with “a small amount, about GH¢9 million”, making it difficult for Unilever to fund the payment of a higher dividend.

While the hike in receivables is not impacting the company’s impairment book, the head of Research said: “It is putting a strain on their cash flow, which forces them to go and borrow.”  

“The GH¢9 million was very low, if you look at it from a quarter-on-quarter basis,” he stated.

As a result, he said, the company would be better off if it turned its receivables into cash to help reduce its exposure to loans and their attendant consequences on interest expense.

Reversal of recovery 

The 4.3 per cent decline in the company’s revenue in 2016 intercepts the strong rebound in revenue and net profit that was recorded in the last two years.

After losing some GH¢313,000 to the cedi depreciation, high inflation and erratic power supply in 2014, the company’s fortunes rebounded in 2015, resulting in a GH¢35.7 million net profit in that year.

That strong rebound has, however, been neutralised by the weak growth in revenue last year.

The development mirrors the challenging environment that the economy went through last year, Mr Amoah-Adjei said in an interview.

“We realised that the revenue dropped as a result of a very poor economy that did not allow them to sell as much products as they should have.”

“Also, because they have branded products, people tend to move away from such products to cheaper alternatives whenever things are not going well,” he added.

Unilever Ghana, which is the local unit of Unilever Plc, retails and wholesales popular household consumables, including Pepsodent, Geisha, Lux, Blue Band and Dettol, in the country and the sub-region at large.

“For companies such as Unilever, they do well when everything is going on well and people are buying and selling. You know, when we get a little income, we tend to move up the social ladder a little and doing that involves buying some of these products.

“But if things are not good, people tend to find cheaper alternatives that may not even be branded, and that is where these companies suffer from,” he mentioned.

Bright prospects

Despite last year’s weak performance, Mr Amoah-Adjei said the uptick in consumer confidence and the general return of stability in the economy could brighten the fortunes of the company in the coming months.

Already, Unilever’s first quarter result released earlier this month showed that revenue was up by 8.8 per cent, from GH¢127.1 million in the same period last year to GH¢138.3 million in March this year.  

The 2017 quarter one performance is the second best quarter performance, FirstBanC’s head of Research said, explaining that it signalled good fortunes for the company in the coming days.

“The issue for them now will be if the consumer confidence that we are seeing will be sustained, going forward. If there is any destruction to that, it will put pressure on their revenue again. However if the economy grows as we all expect it to, then they will continue to enjoy that benefit going forward,” he said.