The profit of Unilever Brothers Limited is likely to register a decline of 4 percent in 2003, and is expected to pay a dividend in the range of Rs 68 and Rs 70 per share.
Unilever will announce its financial results for the calendar year 2003 in its board meeting on Wednesday. It will post after-tax profit of Rs 1.66 billion - Rs 1.69 billion (EPS Rs 125-127), a 4 percent fall from last year, said a report of Investcapital Securities, prepared by Kashif Artani.
It has already paid its shareholders Rs 58 a share as interim dividend. We expect final dividend pay-out between Rs 68 and Rs 70 a share. In the outgoing 2003, Unilever Pakistan continued to face competition from informal segments selling smuggled/imported soaps, loose tea, and players like Habib and Tapal. Increased international commodity prices kept margins in check specially of edible oil segment.
After seeing red at the operating level in first half of 2003, the cooking products segment showed marginal profits in third quarter of 2003. This segment has been a problem area for Unilever in 2003 due to increased international palm oil prices and tough competition from the Habib and informal segment selling loose oil.
Unilever is considering divesting its edible oil segment, and this decision is officially attributed to global company strategy, but recently depressed cooking oil performance may have also had its impact.
The Ice cream segment performed well in third quarter of 2003. Though fourth quarter of 2003 may have seasonal impact, full year performance of ice cream is expected to show a significant growth, while beverages segment, which contributes around 38-40 percent towards Unilever's total revenues, has performed reasonably well in 2003.
This segment has attracted increased investment by the management. We expect this segment's operating profit to fall around Rs 1.25 billion mark in 2003. A new player, Tetley, has recently entered the tea market of Pakistan. Though it is targeting the segment in which Tapal operates, Unilever's Lipton and Brooke Bond may witness some erosion in revenues.
The soap business is facing stiff competition from smuggled/imported soaps. However, introduction of new variants in shampoo and cream business has proved fruitful for the company. Due to a number of factors, we expect operating profit of this segment to fall.
At current market price of Rs 1,455, we would like to advise investors to book profits on any rise in share price. However, Unilever's shareholders may also receive some one-time cash flow going forward if edible oil segment disposal materialises.
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