Unilever profit falls 29% in Q3 due to tax burden

October 21, 2024 (MLN): Unilever Pakistan Foods Limited (PSX: UPFL) recorded a decrease of 28.8% YoY in its profits, with the company's after-tax profits dropping to Rs1.63 billion [EPS: Rs255.44], compared to the bottom line of Rs2.28bn [EPS: Rs358.6] in the same quarter last year.

The company's directors have recommended a third interim cash dividend of Rs511 per ordinary share of Rs.10/- each.

Cumulative interim dividend declared for nine months ended September 30, 2024, of Rs1,277 per ordinary share.

This will be payable to the members on the number of ordinary shares held by them at the close of business on November 4th, 2024

This is in addition to an interim dividend of Rs251 already paid during the year.

Going by the results, the company's top line increased by 1.3% to Rs7.81bn as compared to Rs7.71bn in SPLY.

However, the cost of sales rose by a greater proportion, resulting in a 3.1% decline in gross profit to Rs3.09bn in Q3 CY24.

Accordingly, the gross margins worsened to 39.6% as compared to 41.3% in SPLY.

During the period under review, other income slid by 3.1% to stand at Rs698.56m in Q3 CY24 as compared to Rs720.92m in SPLY.

On the expense side, the company's administrative and distribution expenses fell 12.2% YoY to Rs1.36bn.

The company’s finance cost went up by and stood at Rs16.37m as compared to Rs5.03m in SPLY, mainly due to higher interest rates.

The most significant aspect that stands out is the tax expenditure, which rose by 839.5% to Rs787.67m, becoming one of the main reasons for the drop in the bottom line.

On the tax front, the company paid a higher tax worth Rs787.67m against the Rs83.84m paid in the corresponding period of last year, depicting a rise of 839.5%.

For the nine months, the business faced an overall sales decline of 6.2%. However, recently landed pack price architecture interventions have resulted in a volume uplift.

In response to compounding inflation, we took resilient measures and successfully delivered a gross margin of 39.1%. EPS declined by 27.3% largely contributed by tax credits maturity.

Future Outlook (Unilever): 

Recent staff-level agreement with the IMF, declining policy rate and subsiding inflation, are signs of the country moving towards economic stability. However, the implementation of ambitious reforms is crucial for long-term growth.

Despite the volatilities in the external operating environment our management team remains committed to overcoming obstacles and delivering shareholder value on the back of our brand equity.

Amount in thousand except for EPS

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