Unilever Nigeria Plc’s improving cost efficiency is strengthening its earnings outlook, with CardinalStone Research expecting profitability to remain firm into 2027 despite softer sales volumes and pressure on consumer affordability.
The consumer goods company expanded profit after tax by 20.1 percent year-on-year in the first nine months of 2026, according to CardinalStone’s company update. The research firm attributed the performance to top-line expansion and continued cost optimisation, even as global energy costs remained elevated.
CardinalStone expects earnings momentum to continue in the current and following financial years, supported by improved sales, efficient cost management, and a low-leverage position. It also expects ongoing capital expenditure to support production volumes over the medium term.
A key driver of the outlook is Unilever’s ability to contain operating costs. Its cost-to-sales ratio fell to 53.6 percent in the nine months to September 2026, from 58.8 percent in the corresponding period of 2025. CardinalStone linked the improvement to measures including alternative energy use and an efficient distribution network.
The gains have prompted the research firm to raise its FY’26 gross margin forecast to 46.0 percent, from 41.3 percent previously. It also lifted its EBIT margin forecasts for FY’26 and FY’27 to 20.4 percent and 23.9 percent, respectively, from 18.8 percent previously for FY’26.
CardinalStone expects relatively subdued growth in logistics expenses to provide further cost relief, while marketing efforts could support stronger sales traction over the near to medium term.
Revenue remains a challenge. CardinalStone said Unilever’s 9M’26 revenue fell below its previous expectations, suggesting demand may have constrained its ability to pass higher input costs to customers. It now forecasts FY’26 revenue of N247.8 billion, with weaker volume assumptions tempering the outlook.
The research firm nevertheless sees Foods Products as the main driver of revenue growth, supported by its established market presence in Nigeria.
CardinalStone maintained a BUY recommendation on the stock, with a 12-month target price of N129.71, implying a potential 15.6 percent appreciation from its reference price of N112.20.
The firm also flagged Unilever’s net long foreign exchange exposure as a risk to its FY’27 outlook, following exchange losses during the review period.
Related News
Source: