Highlights of Nestle Nigeria Plc 9M’21 financial performance.

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Dear Esteemed Reader,


Kindly see the above highlights of Nestle Nigeria Plc 9M’21 financial performance.


Nestle Nigeria Plc’s EPS in 9M 2021 grew by 5.16% YoY to N42.31, significantly lower than the 22.97% YoY improvement in topline recorded over the same period largely due to input cost pressures and elevated interest expenses. However, the company remained operationally efficient, thus, supporting the mild 4.71% YoY growth in PBT to N51.58bn in 9M 2021.

Over the 9M 2021 period, Nestle Nigeria Plc recorded improved revenue generation from both its Food (+25.09% YoY to N154.34bn) and Beverage (+20.04% YoY to N107.25bn) business. This supported a 22.97% YoY improvement in topline to N261.59bn, which is a 2.78% deviation from our estimate of N254.51bn. We believe the increased revenue number is reflective of the recovery in activity levels, which may have improved consumer spending relative to 9M 2020 period. However, cost of sales remains elevated (+30.64% YoY to N160.30bn) printing higher than the growth in revenue largely due to inflationary cost pressure and Naira devaluation. Consequently, gross margin contracted by 360bps YoY to 38.72% with gross profit growing by 12.51% - significantly lower than the growth recorded in topline.

While the company continued to effectively manage its opex/sales ratio (down 146bps YoY to 17.27%), the passthrough impact of elevated input cost pressure on gross margin led operating margin down by 216bps YoY to 21.45% and moderated the improvement in operating profit over the period (+11.83% YoY to N56.12bn). Moving down the P&L, we highlight significant increase in net finance cost (+391.23% YoY to N4.53bn) majorly driven by the significant increase in total loans and borrowing (+191.36% YoY to N71.27bn) and recovery in yields relative to 2020 levels. Consequently, PBT and PAT increased by 4.71% YoY and 5.16% YoY to N51.58bn and N33.58bn respectively.

Nestle Nigeria Plc has declared an interim dividend of N25.00 per 50kobo ordinary share. We maintain our target price of N1523.50 on the stock which implies 8.43% upside from current price level. This said, we have a HOLD recommendation on the stock.


 

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