Nestle Nigeria published its full-year (FY) 2019 earnings report with topline rising by 6.67% to settle at N284 billion (underperforming our FY 2019 estimate: N296 billion) vs N266 billion the corresponding period of 2018.
Despite recent border closure, we noted growth in export by 43.6%, largely due to increased export to Ghana and Burkina Faso. Also, the food segment continues to contribute the largest chunk to top-line settling at 62% while Beverages contributed the residual 38%.
Furthermore, we witnessed swifter growth in beverages (10%) than the food segment (4.7%). Moving on, we noted a marginal spike of 3.08% in operating cost, majorly due to rise in distribution expense (following persistent dilapidated road network and road gridlock), raw material and consumables, and other personal expense.
Nonetheless, operating profit returned stronger to N72.06 billion (FY’19 estimate: N72.688) vs N60.64 billion FY 2018, representing a growth of 18.83%. Finance income and expenses shrank for the period when compared to 2018 by 22.6% and 13.04% respectively. Profit before tax spurred in the period under review by 19.03% to N71.12 billion (FY’19 estimate N71.34 billion) vs N59.75 billion recorded in FY 2018.
Consequently, NESTLE recorded a profit after tax (PAT) of N45.56 billion for the year against N50.22 billion in FY 2018. This is lower than our FY2019 estimate of N58.44 billion, majorly due to our lower income tax expense estimate. NESTLE declared a final dividend of N45.00 per share, representing a 4.42% dividend yield.
Our blended model currently posits a fair value estimate of N1,370.8 for NESTLE, hence, We recommend a BUY at the current price level.
Greenwich Research
