Home' Trinidad and Tobago Guardian : June 7th 2015 Contents Unilever Caribbean Ltd
(UCL) has responsibility
for the manufacture
and sale of Unilever
Group s products locally
and in the Southern
In 2014, it faced many of the challenges
common to other local business entities, such
as, anaemic economic growth, lower energy
prices (particularly in the latter part of the
year) and inconsistent access to foreign cur-
As 2015 started, new internal challenges
awaited it, which had the effect of significantly
pulling down its first quarter s results.
We will now review UCL s performance for
the year ended December 31, 2014.
Changes in financial position
Total assets rose by 10.7 per cent to $394.7
million from $356.5 million as at December
Three major items, plant, property and
equipment, inventories and trade and other
receivables, accounted for the bulk of these
Plant, property and equipment rose by
almost $4 million to $83.9 million from $80
million as at December 2013. This change rep-
resents the excess of additions of $8.8 million
over disposals ($64,000) and current period s
depreciation ($4.9 million). Further increases
will be made later in 2015 in order to improve
efficiency, enhance safety and facilitate product
In 2013, additions of $4.9 million were only
slightly greater than the depreciation of $4.6
million. Back in 2012, the modest additions
of $1.8 million were eclipsed by that year s
depreciation charge of $4.75 million.
Inventories advanced to $64.3 million from
the previous year s $51.5 million. Finished
goods, raw materials and goods in transit all
recorded increases. Most of this build up
occurred in the last quarter in anticipation of
a planned shutdown to facilitate the imple-
mentation of a new IT system in the first
quarter of 2015.
Trade and other receivables climbed from
$99.7 million to last year s $159.6 million. The
major increase was concentrated under receiv-
ables from new customers, which expanded
to $54.3 million from the previous year s $23.2
million. Also contributing to the overall increase
was VAT recoverable; this component rose to
$12.32 million from the previous level of $9.76
Naturally, this spike in receivables was a
major contributor to the deterioration of its
cash position, which declined to $24.2 million
from the 2013 balance of $60.3 million.
Total liabilities increased to $175.6 million
from $152.3 million as at year-end 2013.
UCL s relatively weaker cash hoard resulted
in a rise in the major components of its current
liabilities, in particular, the trade and other
payables and the amounts due to its parent
and affiliated companies. The former rose to
$95 million from $79.7 million while the latter
grew from $15.2 million to last year s $23.9
Stockholders equity advanced to $219.1 mil-
lion from the previous level of $204.2 million.
The major change was recorded under the
retained earnings component, which advanced
by $14.9 million to $157.6 million.
The current year s profit of $66 million
boosted this figure while dividends to share-
holders of $51.2 million restrained the net result.
With 26,243,832 shares outstanding, each
share has a book value of $8.35 (2013: $7.78).
Income and profits
Total revenues advanced by a modest 1.45
per cent to reach $587.8 million from 2013 s
$579.4 million. The increase was concentrated
in regional markets, where revenues rose by
3.4 per cent to $233.4 million from $225.6 mil-
lion. On the other hand, local sales only man-
aged an anaemic 0.2 per cent improvement to
$354.4 million from 2013 s $353.8 million.
The cost of sales rose disproportionally by
2.6 per cent, moving from $345.7 million to
last year s $354.7 million. A major component,
raw materials and packaging, climbed by $11.5
million or 8.5 per cent reaching $146.1 million
(2013: $134.6 million). Wages, salaries and ben-
efits rose to $89.2 million from the 2013 level
of $85.5 million.
These changes saw gross profit decline mar-
ginally to $233.1 million from $233.7 million.
At $116.2 million, selling and distribution
costs were $3.2 million or 2.9 per cent greater
than the $112.9 million recorded for 2013. In
contrast, administrative expenses registered at
$34.1 million; this was $1.3 million (3.8 per
cent) lower than the previous year s $35.4 mil-
These movements allowed UCL to report
an operating profit of $82.8 million. This was
$2.5 million less than the $85.3 million recorded
Both other income and net finance income
were lower in 2014. Other income came in at
$5.6 million versus $8 million in 2013. This
item represents the gain on the sale of the
parent company s brands and is generally not
predictable. Meanwhile, in line with its lower
cash balances, net finance income came in at
$18k versus $25,000.
Pre-tax profit for 2014 came in at $88.4
million compared with $93.4 million for the
Despite a lower profit, the effective tax rate,
at 25.2 per cent was higher than the 24.5 per
cent paid for 2013.
After all these allocations, the net profit
came in at $66.1 million versus $70.5 million
These results translated into 2014 EPS of
$2.52 compared with $2.69 for 2013.
Only the personal care segment, which
includes skin, oral and personal hygiene prod-
ucts, delivered both higher sales and improved
The foods segment saw both its revenues
and profits fall slightly.
The home care division, which includes
laundry and other household products, deliv-
ered higher revenues but recorded lower profits.
Exports to Guyana and other markets helped
the revenues position. In contrast, the lower
profit reflected variable profitability with
respect to different product sizes, which some
export markets demand.
Dividends and share price
UCL s dividend for 2014 was $1.77, of which
$1.45 will be paid on June 22, 2015. This com-
pares with $1.95 paid with respect to its 2013
fiscal period. As recently as 2012, UCL paid
out dividends of $2.80, an amount that exceed-
ed that year s EPS of $2.22. For both 2010 and
2011, the percentage payments have been less
than 70 per cent of earnings.
At the recent price of $66.15, investors would
have a yield of 2.68 per cent.
With demand frequently greater than supply,
the price of UCL generally moves in an upward
trajectory. Its share price opened 2014 at
$56.20, and then on June 11, 2014 it traded at
$61.25 before closing on December 31, 2014
At the recent price of $66.15 and a book
value of only $8.35, its Price to Book multiple
is a robust 7.92 times.
Last week, when we looked at Plipdeco we
derived a Price to Book multiple that was 0.08
or less than eight per cent of its book value.
What might be the reasons for these wide
discrepancies among various shares? In Plipde-
co s case, its most reliable source of profit is
its estate management business.
While the two companies cannot be easily
compared, UCL is involved in a mixture of
consumer manufacturing and trading activities,
both of which are less capital intensive than
operating a port. In addition, its profits are
more predictable. Also, its products have high
brand recognition and its dividends are very
The delay in the full implementation of its
new IT system hindered the re-start of full
operations and contributed to a serious fall in
both sales and profits. It was not until the end
of the quarter that operational normalcy
returned to the company.
Sales contracted by $21.56 million (15.95 per
cent) to $113.6 million from the prior period s
$135.15 million. After-tax profit registered at
$5.85 million; this represented a decline of
$7.96 million or 57.66 per cent lower than the
$13.81 million recorded for the same period
On a positive note, cash balances rose from
the 2014 year-end balance of $24.2 million to
$41.73 million on March 31, 2015. Helping to
improve the picture, the excess of current
assets over current liabilities rose from 2014 s
$127.2 million to $133.5 million as at the end
of the first quarter.
Subsequent to the hosting of the AGM on
May 21, 2015, Gary Voss retired as chairman
after more than 33 years service to the com-
pany. His replacement, Mr Pablo Garrido,
assumed the chairmanship, effective May 22,
Based on the lower results for the first quar-
ter, largely related to the delay in implementing
the new IT system, the former chairman cau-
tioned that it would be difficult for the com-
pany to meet its sales and profits targets for
the full year. This cautionary note was made
despite the efficiencies that the new system
will eventually bring to UCL s overall opera-
On that basis, investors should moderate
their expectations for either dividends or capital
appreciation for the current year. Notwith-
standing these developments, some investors
may, later in the year, find a more attractive
price point at which to buy these shares.
In my article last week on Plipdeco, the fol-
lowing text erroneously appeared in the tenth
paragraph in the first column:
"Point Lisas Industrial Port Development
Company Ltd s results caused it to significantly
restate its 2013 numbers. Fortunately, its."
Astute readers would have realised that the
text above should have been ignored.
JUNE 7 • 2015 www.guardian.co.tt SUNDAY BUSINESS GUARDIAN
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