Revenue, investment , drive Nestle’s 2,988% HY profit
Nestle Nigeria Plc submitted its H1-17 performance scorecard on the Nigerian Stock Exchange on Friday, growing revenue by 51.6% y/y to N121.9bn against N80.4bn in H1-16.
The company’s profit before and after tax recovered sharply, up more than 2000% apiece to N24.5bn and N16.5bn respectively.
The impressive performance was supported by the dual impact of upward price adjustment and increase in volume as observed since Q1-17
Nestle hiked prices by over 30% in 2016 amid tougher economic and operating environment. Improved volume numbers, on the other hand, may have been driven by liquidity crunch in the FX market which pushed back competition from imported substitutes, notwithstanding the recent improvement in the FX market.
Cost of sales also increased 54.2% to N73.6bn amid pressure on input cost. The impact on gross margin was, nevertheless, marginal, down 1.0% from 40.7% in the prior period to 39.7% in the period under review.
Although OPEX rose 21.9% y/y, finance cost dropped 50.4% to support bottom-line. However, a 529.8% expansion in finance income provided an additional boost for PBT and PAT, as both rebounded more than 20x apiece to N24.5bn and N16.5bn respectively.
Nestle’s Balance sheet position remained healthy in contrast to peers in the sector, as Net Asset expanded 27.9% YTD to N39.5bn. Total Asset was up 4.1% YTD to N176.6bn majorly driven by improved cash & cash equivalent (up 11.0% to N57.0bn). Total Liabilities, on the contrary, declined 1.2% to N137.1bn.
The stock currently the highest priced on the Nigerian Stock Exchange at N1,003.27 per share, trades at P/E and P/B ratios of 31.7x and 19.2x, well ahead of peer averages of 27.3x and 17.3x respectively while annualized RoAE stands at 67.8%.
With a target Price of N1050.9 set by analyst, the stock’s performance remains largely in line with expectation.
The stock is expected to rally in coming sessions based on the impressive performance: “We expect stronger revenue and investment income numbers to buoy bottom line significantly by FY-17 after a sharp drop in FY-16 PAT.” Says analyst at United Capital, a Nigerian Based research firm.
