DEPOK (eNBe Indonesia) - Shares of unilever indonesia, the market leader for home and personal care, ended lower by 2.1% to Rp4,920 on Thursday (Feb 9) to make a market capitalization of Rp187.7 trillion as the company reported weaker financial performance last year.
UNVR peaked at Rp11,000 five years ago, and has in the past two years never returned to above Rp6,000.
UNVR booked net profit of Rp5.36 trillion in 2022, declined 7% year on year (y/y), due to higher costs. Still, UNVR consistently posted return on equity (ROE) above 100%, one of the best in worldwide operation of Unilever.
The company paid out cash dividend of Rp5.82 trillion last year. While lower than the previous year (Rp6.34 trillion), UNVR’s parent also got Rp2.59 trillion of payments of service fees and royalties.
We continue our criticism on service fees and royalties paid out by UNVR to Unilever because it consistently more than payments of corporate income tax to Indonesian government (Rp1.76 trillion last year).
Payments of service fees and royalties dropped significantly from Rp3.14 trillion in 2021 when it paid out corporate income tax of Rp1.85 trillion only.
We also criticize the company’s role as a multinational company in promoting export because sales from export market was only Rp1.74 trillion, nothing compared to domestic sales of Rp39.5 trillion.
Unilever’s export was substantially smaller than national companies like Mayora Indah (MYOR) or Indofood (INDF).
Net sales grew 5.1% y/y to Rp41.2 trillion last year, but cost of goods sold rose 10% y/y to Rp22 trillion. Marketing and selling expenses also increased 7.7% y/y to Rp8.45 trillion.
The majority of this increase was due to higher advertising and research expenses, which grew 39.33% y/y to Rp3.04 trillion. As a results, operating profit fell 7.9% y/y to Rp7.07 trillion.
For the fourth quarter (Q4) of 2022, UNVR’s sales reached Rp9.67 trillion, lowest from previous quarters last year, but higher than Rp9.52 trillion in Q4 of 2021.
The household and personal care products segment contributed Rp27.25 trillion in 2022, up 3.8% y/y. Food and beverage segment contributed Rp13.96 trillion, grew 6.02% y/y.
UNVR’s President Director, Ira Noviarti, said 2022 was a year when UNVR prepared a stronger foundation to grow better after going through a tough 2021.
Ira added UNVR managed to increase its market share amidst the tight competition in the FMCG industry.
“Despite the intense competition in the FMCG industry and various challenges such as rising commodity and fuel prices, our competitiveness has increased with a total market share in 2022 strengthening compared to 2021,” said Ira in an official statement, Thursday (February 9).
Ira explained further, UNVR had strengthened its fundamentals in 2022 through five strategies–strengthening the strength of its main brand, enriching its premium product portfolio, strengthening its position in general trade and modern channels, implementing digital adoption in all business lines, and prioritizing a sustainable business.
In line with this strategy, UNVR decided to increase advertising spending in 2022 by over 30%, at Rp2.18 trillion, grew 26% y/y.
UNVR’s earning performance is in line with its parent Unilever Plc, with global sales groring 9% in 2022, but operating profit only rose 0.5% to 9.7 billion euros, the lowest in past seven years.
Unilever CEO Alan Jope stated that product selling prices had increased by 11.3% throughout 2022. Meanwhile, sales volume was corrected by 2.1%.
He estimates that consumers will probably reduce their consumption because the trend of rising selling prices due to high inflation. Then for this year, Unilever estimates that sales will only grow 3-5%.
Unilever also estimates that raw material inflation will reach 1.5 billion euros in the first half (H1) of 2023 and will start to slow down in the second half (H2) of this year.
Production and logistics cost inflation is expected to be around 500 million euros and gross margins will continue to decline in H1 of 2023.
Due to the wake of the COVID-19 pandemic, the remaining weak purchasing power affected Unilever’s earnings.
But the public purchasing power is expected to grow this year and the growing economic activity due to the weak implementation of public movement restrictions. Unilever opted to focus on cost efficiency for maintaining its profit margin.
Unilever noted that the public purchasing power has recovered, including the fast-moving consumer goods (FMCG) business that was hit by the impact of the COVID-19 pandemic in 2020.
Public purchasing power will rely on the development of the vaccination program.***
