" /> Nestle sparkles in Q3 results | Hallmarknews
Published On: Mon, Nov 13th, 2017

Nestle sparkles in Q3 results


As the packaged Consumer goods (PCG) sector struggles to stay ahead of falling consumer demand, companies such as Nestle Nigeria plc are bucking the trend of businesses with shrinking bottom lines. Indeed the multi-product packaged goods producer has seen earnings rise to mind boggling with its pre-tax profit rising by a stunning 526 per cent year on year between third quarter 2016 and the comparable period of 2017. The earnings growth becomes particularly impressive when compared to the 74 per cent drop in year on year third quarter earnings between 2015 and 2016.Nestle has somehow found an elixir to the problem of durable profitability and appears set to dazzle equity holders as its share price skims past N1,290.
The maker of premium food beverage, Milo, saw its revenue rise to N185.242 billion in 2017, up by 43 per cent from N129.482 billion in the comparable period of 2016, while its cost of sale stood at N109.362 billion, compared to N77.546 a year earlier.
Gross profit rose to N75.881 billion, from N51.933 billion, but net finance costs fell 56 per cent to N8.606 billion, from N19.865 billion in 2016.
Profit before tax jumped by 526 per cent from N5.504 billion in 2016 to N34.479 billion, while profit after tax leapt by 4,638 per cent from N485 million to N22.979 billion.
A further of Nestle’s recent quality result was that net forex loss fell by 42 per cent from N19.4billion in 2016 to N11.148billion in 2017, a situation that worked in favour of the company’s bottom line. Personnel expenses rose 7 per cent from N15.8billion in 2016 to N17.057 billion in 2017. The interest income from its bank deposits rose 196 per cent from N2.118billion in third quarter 2016 to N6.281billion in 2017.
This is an unprecedented performance in the life of the company, according to industry analysts.
With stronger earnings the company has announced an interim dividend of N15.00 per share, which was a departure from last year’s situation when the beverage maker shied away from paying interim dividends.
Speaking on the results, the company’s Managing Director, Mr. Mauricio Alarcon, assured stakeholders of the determination of board and management to sustain the positive performance.
He explained that revenue growth was supported by strong consumer and distribution-led activities as well as benefits of pricing effects of last year.
“The growth is an affirmation of the loyalty and trust that our consumers have in our brands despite pressure on disposable income and tough market conditions,” he said.
The company added that net profit for the period has increased substantially due to internal cost savings, increased operating efficiency and a significant reduction in net financing costs.
According to Alacron the company’s board and management, ‘remain committed to unlocking the potential of the business supported by our strategic roadmap. The company will further increase investments behind brands and route-to-market activities while proactively managing input cost pressures,” he added.
The beverage giant had posted a fall in profit after tax of 66 per cent from N23.7billion in 2015 to N7.9 billion in 2016, caused by a revaluation of dollar denominated loans. This challenge was equally attributable to macro-economic conditions in 2016 which were reflected in the poor dividend payout for the year as dividend fell from N21.00 to N10 per share.
However, Nestle posted a turnover of N181.9 billion in the review period compared with N151.3 billion in 2015, an increase of 20 per cent. Its operating profit stood at N38.2 billion in contrast to the N33.7 billion recorded in the preceding year representing a growth of 13 per cent.

When Nestle Nigeria’s stock rose o N1,088.00 per share in May 30, 2013 many analyst had thought it had reached an all time market peak. But its share price has gained a further 59 per cent year to date to close the recent weekend at N1290.00 per share. This places its share about N795 higher than local oil major, Seplat Petroleum Development Company; the next highest priced stock in the market, trading at N495.00 per share as at Friday last week.
Before the market meltdown in 2008, Nestle was one of Nigeria’s most formidable PCG companies. Its dividends history shows 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 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 N10.00 in 2016.
Market analysts have been impressed with the company’s finacial outlook for the year, particularly in third quarter. Managing Director of Crane Securities, Mr. Mike Ezeh believes that Nestle Nigeria is always recording high turnover which serially improves its profit. According to him, consumers have strongly embraced the company’s products which are seen as household staples.

Despite its achievements, however, the difficult operating environment needs to be watched.
Even though the price of Crude oil has risen, the operating environment is still tough for businesses given general economic contraction. Banks are still not favourably disposed to giving out loans. This, many think, could affect the purchasing power of consumers of not only products of Nestle Nigeria but also other companies. There is a strong local belief that profit margins as well as turnover figures may remain uncertain for some time to come. Analysts point out that when other economic indicators are low; other aspects of economic activity become adversely affected.
Recently, African leaders and other stakeholders have expressed worry about the future of manufacturing in the continent despite the avalanche of human and natural resources available.
Their view was that the traditional industrial pattern which is still holding sway in Africa would continue to keep the continent down if it does not join the fourth industrial revolution which embraces emerging technologies such as mobile connectivity, artificial intelligence, next-generation robotics, and 3D printing, supply chains, etcetera.
In his key note address at the yearly general meeting of Manufacturers Association of Nigeria (MAN) former President of the United Republic of Tanzania, Benjamin William Mkapa, said Nigeria and other African countries will be making a grave mistake if they looked at the development of industries in the world and think that they ought to follow a similar path to that industrial economies have followed, and ignore areas where Africans have comparative advantage.
“As a start, it is important for Nigeria to pause for reflection and assess its own economic history and profile so as to determine its impact on manufacturing sector so far. Generally speaking, the outlook of manufacturing in Nigeria and in Africa is uncertain’’, he said
Nevertheless, Nestle has remained consistent in terms of operating performance. This has justified its price over the last few quarters. A number of analysts have pointed at the large institutional equity of its core investors as the major reason the stock may be considered illiquid. A breakdown, however, shows 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.
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>

Recent posts

  • PDP in fresh crisis over chairmanship zoning, threatens 2019

    By Obinna Ezugwu The December 9 Convention of the People’s Democratic Party (PDP) will be the most critical in its history; it is a convention that would, to a large extent, determine its fate and course for action ahead of the much awaited February 2019 general election and may also determine its chances of returning […]

  • Why South East should ignore President Buhari

    By UCHE CHRIS   President Buhari’s last week visit to the south east on APC campaign for Anambra governorship poll and his promise to give more appointments to the region is a clear and abundant proof that he is either a bad politician or he takes the Igbo for a fool. It is sad and […]

  • GTBank doubles stock value as investors go bullish

    By OKEY ONYENWEAKU GT Bank’s share price has doubled in the last one year, leading investors to grin satisfactorily as there gambit on the stock seems to have panned out. The stock’s price has risen from N24.00 in January 2017 to N43.00 as at November 17, 2017, creating a capital gains opportunity of 79.2 per […]

  • Moody’s rating exposes poor state of banks

      .           Experts predict more recapitalization next year FELIX OLOYEDE Deposit Money Banks (DMBs) in the country have been caught in the web of liquidity squeeze, capital adequacy challenge and the encumbrance of raising fresh funds  as Moody’s Investors Service (Moody’s) downgraded their long-term local currency deposit and issuer ratings. The credit rating agency lowered […]

  • Brain drain: Doctors, nurses’ exodus cripples Nigeria’s health sector

    By AYOOLA OLAOLUWA The mass emigration of health care professionals, especially doctors, pharmacists and nurses, is on the verge of crippling the nation’s health sector, Business Hallmark findings have revealed. Though, the mass exodus of these skilled health workers abroad for greener pasture has been on unabated over the years, it has now reached an […]

  • S&P rates UBA highly, affirms ‘B/B’ credit ratings

    FELIX OLOYEDE S&P Global Ratings has given United Bank for Africa (UBA) a B/B rating based on the rating agency’s interpretation of UBA’s competitive strength in the Nigerian banking market. The agency’s latest report released on Friday showed that the bank has benefited from a strong brand franchise in the corporate and retail segments of […]

  •  Nigeria: The disquieting nuisance of elitism

    By TESLIM SHITA-BEY   At the heart of Nigeria’s social and economic dysfunction is not just the usual suspects of tribe and religion but also, and quite disturbingly, the self-preening and self-adulation of Nigeria’s elite. The failure of the educated leaders of the country to bring about a collective sense of nationhood and build a […]

  • (Across the counter) University of Ibadan banking services waiting for relief

    Banks within university environment usually have a large turnout of customers. It wasn’t any different when our across the counter team visited some banks within the University of Ibadan environment to review the quality of service being rendered. Our criteria included bank professionalism, customer care efficiency, security consciousness, corporate environment and ATM efficiency. Here is […]

  • Time is ripe for rates cut, says Rewane as inflation slows further in Oct.

    FELIX OLOYEDE This is the appropriate time for the Monetary Policy Committee (MPC) of the Central Bank of Nigeria (CBN) to cut benchmark monetary rates after inflation rate slows down for the ninth consecutive time in October, said Mr Bismarck Rewane, Managing Director, Financial Derivatives. The National Bureau of Statistics on Tuesday released Consumer Price […]

  • ELAN National Lease Conference Focuses on Revamping Nigerian Economy

    FELIX OLOYEDE In furtherance of its objective of promoting the business of leasing in Nigeria, Equipment Leasing Association of Nigeria (ELAN) has concluded plans to organise the 15th Annual National Lease Conference with focus on revamping the Nigerian economy. The conference which is the biggest gathering of stakeholders in the leasing industry is expected to […]

  • Nigeria-centric restaurant, Labule, opens new outlet in Lagos

    Labule, Nigeria-centric restaurant, operated by an indigenous company, Roots Foods Limited, offering real Nigerian local delicacies in a unique environment that combines the setting of a modern quick service restaurant with that of an African setting of a local ‘buka’, has opened a new outlet on Admiralty Road in Lekki Phase 1, Lagos. The brand […]

  • Nigerian banks shine in Ghana

    By JOHNMARK UKOKO Nigerian banks have been credited with “revolutionizing “the banking sector in Ghana, due to the many innovations they brought to Ghana’s banking sector. The Ghana Deputy Minister of Trade and Investment Hon. Carlos Kingsley Ahenkorah said in Lagos that the innovation and transformation of the Ghana’s banking sector is credited to the […]

  • Ajimobi moves to save Oyo APC from disintegration

    By OLUSESAN LAOYE The seeming crisis in Oyo APC has now forced the Governor of the state, Abiola Ajimobi, to begin consultations with stakeholders to convinced members on why they must come together as a body to face the 2019 general elections, Although the internal crisis is yet to break open as the aggrieved party […]

  • YolaDisCo sale stalled as no potential buyers emerge

    By ADEBAYO OBAJEMU Two years after the core investors of the Yola Electricity Distribution Company, YolaDisCo, declared a force majeure owing to their inability to operate under the reign of terror unleased by Boko Haram, the Federal Government is yet to find any investor interested in operating the utility company, it has been learnt. In […]

  • Company Analysis: Much Ado about Seplat

      By TESLIM SHITA-BEY The oil and gas sector has had a bumpy since the beginning of 2017 with local oil major, Seplat, seeing its financials whipped raw by prior year liabilities despite rising revenues over the nine months (9M). The company in the last two years has moved from being distinctively bad to singularly […]

  • How to start a photography business

    By ZUBAIR DANIE While photography could be accounted for as a full blown course in any offering institution of learning for professionalism, the field equally provides a platform for individuals whose passion it is to project images as a form of livelihood. The socio-cultural aspect of Nigerians that play host of events like: wedding, naming, […]

Visit us on Google+