Unilever Lose N3.726bn From Discontinuing Some of Its Services in Nigeria

Unilever Nigeria PLC has reportedly lost N3.726 billion from discontinuing its home care and skin cleansing products, including Omo washing powder, Pears baby care goods, Key soap, Lux soap, and Vaseline petroleum jelly.

The firm recently released its unaudited interim financial statements for the year ended December 31, 2023. In the statement, Unilever said that the loss for the period under review was higher than N1.492bn in 2022.

Last year, in March, Unilever said it would be exiting the home care and skin cleansing market to focus on repositioning its business for sustained profitability. In December 2023, production and sales for home care and skin cleansing businesses stopped in Nigeria.

Based on the statement released back, it would change its business model to boost the company's growth and meet all needs of shareholders, consumers, and employees.

The statement partly reads, 

• This will involve repurposing the portfolio by exiting the home care and skin cleansing categories to concentrate on higher growth opportunities.

• Strengthening business operations with measures to digitise and simplify processes; and focusing more on business continuity measures that reduce exposure to devaluation and currency liquidity in our business model.

On the figures from the discontinued operations, Unilever said, 

• The numbers reported reflect the results of the Home Care and Skin Cleansing business categories from the beginning of 2023 to their discontinuation in September and December, respectively. The comparative figures represent the full-year results of the business categories in 2022.

In the period under review, Unilever recorded N16.484bn in turnover for the discontinued products, which was overwhelmed by the cost of sales, which stood at N17.044bn. Also, the firm disclosed that it had entered into a finance lease contract with a third party for its plants and machinery previously used in the home care and skin cleaning business categories. The lease term is for ten years, according to the PUNCH report.

With the agreement, Unilever Nigeria PLC has exclusive rights to the know-how, manufacture, distribution, and marketing of international brands, namely Omo, Sunlight, Close-Up, Pepsodent, Vaseline, Lux, Knorr, Royco, and Lifebuoy in Nigeria. Given to it by Unilever Plc, the United Kingdom is expected to pay a royalty of 2% of the net sales value and 0.5% of the net sales value for technology and trade mark licences, respectively.

It continues,

• Also, Unilever Nigeria has a central support and management services agreement with Unilever Europe Business Centre B.V. (previously Unilever Plc) to provide corporate strategic direction and expert advice/support on legal, tax, finance, human resources, and information technology matters. Considering this, a fee of 2% of profit before tax is payable as a service fee.

• Unilever Nigeria Plc enjoyed royalties and service fees holiday in 2023. N106m reported in 2023 is a true-up from 2022 royalty and service fees due.

In the close of 2023, Unilever's revenue is said to have increased to N97.437bn from the corresponding year, N64.642bn in 2022. Unilever's profit also increased to N8.543 billion from the corresponding year's N4.467 billion.