" />
Published On: Sun, Sep 10th, 2017

Nestle defies the odds, grows profit by 67%

First half year (H1) 2017 results for a slew of companies listed on the Nigerian Stock Exchange (NSE) under the Food and Beverages category have continued to gradually underscore the resurgence of the Nigerian economy. Nestle Nigeria Plc, the country’s largest composite food and beverages behemoth, for example posted half year earnings after tax growth of a stunning 233.3 per cent rising from a disappointing N535.8 million in June 2016 to N16.5 billion at the end of half year 2017.  The company’s earnings leap dwarfed the sleepy 0.55 per cent growth in gross domestic product (GDP) over the second quarter of the year and the …per cent growth year-on-year. Admittedly Nestlé’s staggering growth is exaggerated by the low earning base of the previous year.

The company saw turnover grow by 52 per cent in H1:2017 having recorded N121.9 billion in revenue when compared to N80.4 billion earned in H1:2016

Gross profit stood at N48 billion, compared to N32 billion in 2016. Results from operating activities improved from N14 billion in 2016 to N26 billion.

Speaking on the financial performance of the company for the period, Mauricio Alarcon, Managing Director /Chief Executive Officer of Nestlé Nigeria said, “We are particularly pleased with the growth which is an affirmation of the loyalty and trust of our consumers in our brands. The result is also due to the hard work of our people, and our distribution network.’

Alarcon noted that the board and management of the company remained confident that going forward the company would be able to maintain a steady keel for its businesses according to him, “the Board and the management remain confident that our strategic roadmap will continue to leverage on the potential of the business and the Company will further increase investments behind brand and route-to-market activities while proactively managing input cost pressures.”

Analysts have fingered the easing of forex given the Central Bank of Nigeria (CBN) strategic move with ‘Investors and Exporters FX Window’ as helping companies wriggle from under their earlier difficulties. Nestles efforts at more intensive backward integration has helped it source a substantial part of its raw materials locally.

Net loss to foreign exchange dropped by 61 per cent to N5.1 billion in half year 2017 from N13.133 billion in 2016.

The company suffered a major setback last year as profit after tax slipped by a numbing 67 per cent raising the hackles of shareholders who were worried about the company’s performance and their equity investments as the company’s price tumbled severely.

A critical observation of the company’s performance revealed that profit dropped to N7.924bn from N23.73bn recorded in 2015.

Its dividend declared for the period also dropped by 31 per cent to N15.06bn from N21.79bn posted in 2015.

Its basic earnings per share slumped from N29.95 in 2015 to N10.00 in 2016, representing a decline of 67 per cent.  The year 2016 was a rough period for business and firms which reeled under the weight of foreign exchange volatility and other macro-economic challenges including deep recession among others. Net loss to foreign exchange however ballooned from N1.758billion in 2015 to N16.286 billion.

However, the consumer goods company recorded a growth in revenue to N181.910bn from N151.271bn.

Analysts have fingered the easing of forex given the Central Bank of Nigeria (CBN) strategic move with ‘Investors and Exporters FX Window’ as helping companies survive the harsh period. The company’s more serious involvement in backward integration which has helped source substantial part of its raw materials locally. Some of them have hinged the progress of Nestle Nigeria to the general improvement in the economy which has just emerged from recession. The effect of that is the significant growth, according to statistics, of Agriculture, Oil and gas, manufacturing, trade among others. Inflation rate is also backing off.

Managing Director/ Chief Executive of Crane Securities limited, Mr. Mike Ezeh, adduced many reasons why Nestle Nigeria remains a premium stock. Ezeh points out that many investors are attracted to Nestle Nigeria because it is the highest income earning stock on the local bourse. He explained that those who are investing for income channel their investment into Nestle which also pays the highest dividend.

”It has made huge impact in the beverage industry by capturing substantial market share”, he notes.

Nestle Nigeria is a blue chip multi product consumer goods giant, a status that has earned the company huge investor interest.

 

When the company’s stock climbed to N1,088.00 per share in May 30, 2013 many thought that it had attained an all time peak. But its share price has gained 50 per cent year to date to close at N1220.00 per share another unprecedented peak on Thursday September 7, 2017 from N810.00 early in the year and  about N763 higher than Seplat Petroleum , the next highest priced stock in the market.

Before value erosion of stocks in the market in 2008, Nestle was formidable. Its dividends history reveals that it paid N1.50 kobo per share in 2001 and N6.50 in 2002. In 2003 investors earned N7.00 per share as dividends. The company also paid dividends of N7.00 in 2004, N7.00 in 2005 and N10.00 in 2007.It also paid N11.95 kobo in 2008, N12.55 in 2009, N10.60 in 2010 and N12.55 in 2011, N18.50 in 2012, 18.50 in 2013, N17.50 in 2014, 17.50 in 2015 and N19.00 in 2016.

President, Nigerian shareholders Solidarity Association (NSSA), Chief Timothy Adesiyan, told Business Hallmark that Nestle Nigeria has stood the test of time and has benefitted many shareholders.

Nevertheless, the truth is that Nestle has remained consistent in terms of performance aside from having good fundamentals. These have sustained its high price over the years. But many have fingered the huge percentage stake of its core investors as the major reason the stock may be considered illiquid. Details, however, show that Nestle S. A. of Switzerland and Nestle CWA limited, Ghana are the major shareholders of the company, controlling 3.17% and 59.13% of the company respectively. This has left investors with fewer shares of the company.

Nestle still remains what investor Warren Buffet would describe as a ‘fat pitch’ opportunity with interesting upward hidden value potential.

The company commenced simple trading operations in Nigeria in 1961 and has today grown into a leading food manufacturing and marketing company. Nestle which products include Bouillon Cubes, Maggi Chicken, Cray fish and super onion spices, Nestle Nutrend, Cerelac , Nan –Baby food, Nestle Golden Morn-Cereal, Nestle Nido, Carnation- Milk and Nestle Milo (Chocolate drinks) and Nescafe (Coffee) brand of beverages, was listed on the Nigerian Stock Exchange on April 20,1979.

 

Leave a comment

XHTML: You can use these html tags: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <s> <strike> <strong>

Most Shared

Recent posts

  • U.S. stocks drop as Trump cancels North Korea meeting

    U.S. stocks dropped on Thursday after President Donald Trump cancelled a planned summit with North Korean leader Kim Jong Un, while a slide in oil prices and bank stocks also weighed as investors grappled with fresh U.S. protectionist plans. Trump said he cancelled a June 12 summit “based on the tremendous anger and open hostility” […]

  • Buhari will receive 2018 Budget on Friday, says Saraki

    Senate President Bukola Saraki has promised that the 2018 Appropriation Bill will be presented to President Muhammadu Buhari on Friday. Dr Saraki said this on Thursday when he led members of the National Assembly to the State House to break the day’s fast with President Buhari. According to the Senate President, the delay in presenting […]

  • Zenith Bank shares depreciates by 95k

    Zenith Bank plc shares on Thursday at the Nigerian Stock Exchange (NSE) depreciated by 95k to close at N27, The News Agency of Nigeria (NAN) reports. Flour Mills trailed with a loss of N1.40 to close at N31, while Cement Company of Northern Nigeria declined by N1.20 to close at N24 per share. Dangote Sugar […]

  • Peace Corps bill dead finally

    The controversial Nigerian Peace Corps bill has finally been jettisoned as an attempt by the House of Representatives to override President Muhammadu Buhari failed on Thursday. The House of Representatives which boasted it would override the veto of the Buhari could not achieve its aim. The bill seeks to turn the Peace Corps, currently a […]

  • NNPC sets 30% retail market by 2020

    The Nigerian National Petroleum Corporation, NNPC, has directed its downstream subsidiary, NNPC Retail Limited, to ensure it grow its market share of petroleum products distribution in the country to 30 per cent by 2020 It also plans to expand its presence to other neighbouring states in the West African sub-region. In a statement in Abuja, […]

  • Reduction in oil production slows Nigeria’s economy

    Nigeria’s economy grew slower than expected in the first quarter, official statistics showed Monday, with an expansion in oil production offset by a sputtering non-oil sector. The economy grew by 1.9 percent year-on-year in the three months to March, compared with growth of 2.1 percent in the fourth quarter of 2017, said Nigeria’s National Bureau […]

  • Lagos set date to launch Embedded Power Supply Project

    The Lagos State Government has revealed plans to launch the Embedded Power Supply Project come July 2018. The power project is targeted at generating 3,000 megawatts of electricity for the state within the next 3-5 years. This was disclosed on Wednesday by the Commissioner for Energy, Mr. Olawale Oluwo,  in Alausa. He said the project […]

  • ‘Buhari yet to receive passed 2018 budget’

    President Muhammadu Buhari is yet to receive the 2018 budget, one week after it was passed by the National Assembly. The Minister of Budget and National Planning, Udoma Udo Udoma disclosed this at the Federal Executive Council meeting on Wednesday while responding to questions from journalists. The Minster said reports credited to him as saying […]

  • New CIBN president tasks banks on risk management, corporate governance   

    FELIX OLOYEDE Financial institutions in the country have to device strategies to address the issue of poor risk management and corporate governance practices, knowledge gaps in critical core banking functions and non-adherence, which are posing serious challenge to financial industry, said Dr. Uche Olowu, the newly sworn-in President and Chairman of council, the Chartered Institute […]

  • Catholics in nationwide protest against incessant killings

    …Lagos Govt snubs protesters FELIX OLOYEDE Catholic adherents took to the streets across the country to protest the incessant killings taking place in different parts of Nigeria. The nationwide protest coincided with the burial of two Catholic Priests and 17 parishioners, who were killed during a mass in Benue on April 24, 2018. In Lagos, […]

  • Awka Summit fallout: Ndigbo demands new constitution (Read full text)

    Full text of the speech delivered on the occasion of Igbo Summit on Restructuring held at the Ekwueme Square, Awka, Anambra State on Monday 21 May 2018. *Restructuring The Nigerian Federation: The Position of Ndi Igbo* *”Nigeria: A Ga Akpa ya Akpa!”* *EKWUEME DECLARATION 2018* 1. PREAMBLE: The Nigerian project is at crossroads. It does […]

  • Nigeria’s GDP rises 1.95%, non-oil sector accounts for 90.3%

    The oil sector’s contribution to Nigeria’s Gross Domestic Product, GDP remains below 10 per cent in Q1 figures of the nation’s GDP released by the National Bureau of Statistics in Abuja today. According to the NBS, the nation’s GDP grew by 1.95 per cent year-on-year- in real terms in the first quarter of 2018. Although […]

  • National healthcare delivery threatened as sector’s crises worsen

    . JOHESU strike is sheer blackmail – NMA  By BAYO OBAJEMU These are troubling times for the health sector beset by the panoply of problems, some of them of long-standing nature while others are offshoots of long years of neglect by the authorities. But the spectre of war drums that hovers over the sector now […]

  • Foreign CEOs take over Corporate Nigeria

    . They are trying to protect their interests – Experts  By AYOOLA OLAOLUWA Foreigners have taken over the management of most multinational companies in Nigeria, BusinessHallmark findings have revealed. A two-week survey conducted by BH in May 2018, which involved fifty top companies, show that twenty-eight of the companies are headed by expatriates, while only […]

  • UBA’s Uzoka steps out of the shadows

    By TESIM SHITTA-BEY United Bank for Africa (UBA) has had a chequered history of good times and bad times but with its blazing first quarter (Q1) 2018 results setting the tone for a new twist in the tale analysts have begun to take out calculators as they forecast the bank’s potential year-end earnings. With profit […]

  • Ikeja Hotels returns to Lagos bourse

    The Nigerian Stock Exchange (NSE) has given the management of Ikeja Hotels the approval to resume trading after reviewing the two-year suspension placed on the shares of the company on Nov. 10, 2016. According to a ‘facts behind the restructuring’ document released by Ms Tinuade Awe, NSE Executive Director Regulation, trading would commence on the […]