Nestle Nigeria – Supply chain disruption amid high inflationary environment dampen profitability

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Performance highlight

Nestle Nigeria Plc reported a 1% YoY decrease in revenue in its H1 2020 result. Gross profit dipped YoY by 8% due to higher direct cost. Similarly, operating profit fell by 15% owing to a higher administrative cost. Profit before tax declined by 16% while profit after tax reduced by 15%. EPS for the period stood at N27.53k (H1 2019: N33.11k).

Lower revenue from food segment amid weak domestic sales drags group topline

Nestle Nigeria’s revenue YoY declined again in Q2 2020 though at a slower pace than the Q1 2020 decrease. Revenue in Q1 2020 fell by 90bps and declined by 35bps in Q2 2020 mainly due to the weak revenue from the food segment.

Sales in the food segment (61% of the group’s revenue) decrease YoY by 3% from N88.24bn to N86.03bn in H1 2020, which we attribute to competition and weak macros evidenced in the weak domestic sales. Sales in Nigeria declined from N139.77bn to N138.07bn in H1 2020 while export revenue grew impressively by 38% from N2.14bn to N2.95bn in H1 2020.

Supply chain disruption and FX adjustment compress gross profit

Nestle Nigeria’s production cost declined YoY by 2% in Q1 2020. But the trend changed in
Q2 2020 following the supply chain disruption occasioned by the pandemic and FX
adjustment by the CBN. Primarily, the cost of sales in Q2 2020 grew materially YoY by
14% from N36.33bn in Q2 2019 to N41.52bn in Q2 2020. We believe that the primary
driver for the increase was the group’s inability to raise prices following repricing of its
input cost sourced both local and externally. As a result, the group’s cost of sales in H1
2020 increased YoY by 6% from N75.83bn to N80.19bn.

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Consequently, gross profit declined by 8% from N66.08bn in H1 2019 to N60.84bn in H1
2020. Gross profit margin also contracted 343bps to 43% in H1 2020.

Historical Performance

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Nestle Nigeria - Supply chain disruption amid high inflationary environment dampen profitability
SOURCE: Company Accounts

Valuation

Following appropriate adjustments, we have a revised forward EPS of N53.39k (Q1 2020 estimate: N58.11k) on the stock informed by higher cost. We think that the cost pressure will persist given the inflationary environment and inclusion of maize (an input component of the group) in CBN FX exclusion list. Given the weak macros, we think that the group has limited scope for price increases.

Thus, we have a fair value estimate of N1,117.39k on the stock and maintain our HOLD recommendation.

WSTC Research

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Nestle Nigeria - Supply chain disruption amid high inflationary environment dampen profitability - Brand Spur

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All three brands vary in terms of design, features, and functionality. TECNO, an increasingly globally popular brand, is a new generation of smartphone brand today with tasteful artistic design and contempary cutting-edge camera technology. Samsung and Redmi have been fan favourites, and their smartphone models are often popular amongst those most price-conscious consumers.

Camera function - front and rear cameras


Nestle Nigeria - Supply chain disruption amid high inflationary environment dampen profitability - Brand Spur


The consumers nowadays are very savvy in understanding the technology and features that goes into each smartphone model. One of these considerations is the camera capabilities and the supporting software. TECNO CAMON 17 Pro clear winner with a 48 MP front camera, while both the Samsung A51 and Redmi Note 9 Pro cameras are at 32 MP and 16MP respectively, hence allowing the user of TECNO CAMON 17 Pro to capture selfies with quality that is comparable to even rear cameras on some smartphones. Considering the rear camera, TECNO CAMON 17 Pro and Redmi Note 9 Pro are equipped with 64MP rear ultra quad camera, while the Samsung A51 maxes out at 48MP.

What is more fascinating is that the TECNO CAMON 17 Pro comes with trademarked TAIVOS technology, which stands for TECNO AI Vision Optimization Solution. It provides users with extremely good visuals, even in low-light environments. TAIVOS can blur out the clutter in the background and optimize image clarity, thereby enhancing night photography effects. Therefore, making it difficult for other mobile phones to bring users a brighter experience in dark environments. The TECNO CAMON 17 Pro is great for anyone who loves to take selfies as keepsakes. The CAMON 17 Pro's front cameras are just as outstanding as its rear – TECNO is a pioneer in this industry with a 48MP front camera. The functions of TECNO CAMON 17 Pro are smoother than similar products with both multi-camera and AI camera modes, providing breath-taking visuals.

Battery life and storage space


Nestle Nigeria - Supply chain disruption amid high inflationary environment dampen profitability - Brand Spur


Powerful cameras need equally lasting battery and storage space. The TECNO CAMON 17 Pro has enough space for just about anything with 256GB ROM + 8GB RAM whereas the Samsung A51 and the Redmi Note 9 Pro has only 128GB ROM + 6GB RAM respectively, which is half of what the TECNO CAMON 17 Pro can store.

In addition, the TECNO CAMON 17 Pro has an enormous 5000mAh battery so you do not need to worry about your phone not being able to function when you need it most. The Samsung A51 has a smaller battery whereas the Redmi Note 9 Pro has a slightly bigger battery of 5020mAh, but that difference is negated by CAMON 17 Pro's flash charging technology as the phone's battery can be charged faster. And the 33W fast charger of CAMON 17 Pro enable a quick charge of up to 70% in just 30 minutes, which is an upgrade compared to the 15W charger of the Samsung A51 and 30W charger of Redmi Note 9 Pro.

Mobile phone technicalities


Nestle Nigeria - Supply chain disruption amid high inflationary environment dampen profitability - Brand Spur


When it comes to visual real estate, size does matter. Amongst the three smartphone models, the Samsung A51 offers the smallest screen real estate, a 6.5 inches full HD screen while the Redmi Note 9 Pro and TECNO CAMON 17 Pro have bigger screens at 6.67 and 6.8 inches, respectively. Here, the TECNO CAMON 17 Pro does have an edge over the rest and what's more, the 90Hz smooth refreshing rate of TECNO CAMON 17 Pro enable the users never worry about any animation rolling issues on the phone, the 90 Hz super-high refreshing rate offers a smooth, snappy and refreshing experience. The CAMON 17 Pro's full HD mobile phone provides the user with more ease in controlling as well as a more comprehensive view of the mobile games and videos on the phone. Additionally, the TECNO CAMON 17 Pro has an operating system of Android 11 whereas the Samsung A51 and Redmi Note 9 Pro are only at Android 10.

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So which phone would you prefer after reading the comparisons? After our comparisons, the TECNO CAMON 17 Pro stands out for the young, adventurous generation that is looking for a phone that can not only perform the basic functions well, but also have additional tools that add so much value to a phone. Redmi Note 9 Pro performed slightly worse in the front camera, fast charger and the screen, which could be a second choice with limited budget, while Samsung A51 stands out with its brand impact, and with no other obvious strength.


Nestle Nigeria - Supply chain disruption amid high inflationary environment dampen profitability - Brand Spur
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spot_imgspot_img

Latest News

TECNO reveals how the highly anticipated TECNO CAMON 17 Pro measure against its competitors

HONG KONG SAR - Media OutReach - 14 May 2021 - Consumers nowadays are more than spoilt for choice, in fact, many people are affected by 'information paralysis', that is, having too much information to effectively decide, often resulting in either a wrong decision or a poorly evaluated one. In this article, TECNO helps you to make good decisions amongst the three latest Android phones. They are TECNO CAMON 17 Pro, Samsung A51 and Redmi Note 9 Pro.

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Camera function - front and rear cameras


Nestle Nigeria - Supply chain disruption amid high inflationary environment dampen profitability - Brand Spur


The consumers nowadays are very savvy in understanding the technology and features that goes into each smartphone model. One of these considerations is the camera capabilities and the supporting software. TECNO CAMON 17 Pro clear winner with a 48 MP front camera, while both the Samsung A51 and Redmi Note 9 Pro cameras are at 32 MP and 16MP respectively, hence allowing the user of TECNO CAMON 17 Pro to capture selfies with quality that is comparable to even rear cameras on some smartphones. Considering the rear camera, TECNO CAMON 17 Pro and Redmi Note 9 Pro are equipped with 64MP rear ultra quad camera, while the Samsung A51 maxes out at 48MP.

What is more fascinating is that the TECNO CAMON 17 Pro comes with trademarked TAIVOS technology, which stands for TECNO AI Vision Optimization Solution. It provides users with extremely good visuals, even in low-light environments. TAIVOS can blur out the clutter in the background and optimize image clarity, thereby enhancing night photography effects. Therefore, making it difficult for other mobile phones to bring users a brighter experience in dark environments. The TECNO CAMON 17 Pro is great for anyone who loves to take selfies as keepsakes. The CAMON 17 Pro's front cameras are just as outstanding as its rear – TECNO is a pioneer in this industry with a 48MP front camera. The functions of TECNO CAMON 17 Pro are smoother than similar products with both multi-camera and AI camera modes, providing breath-taking visuals.

Battery life and storage space


Nestle Nigeria - Supply chain disruption amid high inflationary environment dampen profitability - Brand Spur


Powerful cameras need equally lasting battery and storage space. The TECNO CAMON 17 Pro has enough space for just about anything with 256GB ROM + 8GB RAM whereas the Samsung A51 and the Redmi Note 9 Pro has only 128GB ROM + 6GB RAM respectively, which is half of what the TECNO CAMON 17 Pro can store.

In addition, the TECNO CAMON 17 Pro has an enormous 5000mAh battery so you do not need to worry about your phone not being able to function when you need it most. The Samsung A51 has a smaller battery whereas the Redmi Note 9 Pro has a slightly bigger battery of 5020mAh, but that difference is negated by CAMON 17 Pro's flash charging technology as the phone's battery can be charged faster. And the 33W fast charger of CAMON 17 Pro enable a quick charge of up to 70% in just 30 minutes, which is an upgrade compared to the 15W charger of the Samsung A51 and 30W charger of Redmi Note 9 Pro.

Mobile phone technicalities


Nestle Nigeria - Supply chain disruption amid high inflationary environment dampen profitability - Brand Spur


When it comes to visual real estate, size does matter. Amongst the three smartphone models, the Samsung A51 offers the smallest screen real estate, a 6.5 inches full HD screen while the Redmi Note 9 Pro and TECNO CAMON 17 Pro have bigger screens at 6.67 and 6.8 inches, respectively. Here, the TECNO CAMON 17 Pro does have an edge over the rest and what's more, the 90Hz smooth refreshing rate of TECNO CAMON 17 Pro enable the users never worry about any animation rolling issues on the phone, the 90 Hz super-high refreshing rate offers a smooth, snappy and refreshing experience. The CAMON 17 Pro's full HD mobile phone provides the user with more ease in controlling as well as a more comprehensive view of the mobile games and videos on the phone. Additionally, the TECNO CAMON 17 Pro has an operating system of Android 11 whereas the Samsung A51 and Redmi Note 9 Pro are only at Android 10.

So which phone would you prefer after reading the comparisons? After our comparisons, the TECNO CAMON 17 Pro stands out for the young, adventurous generation that is looking for a phone that can not only perform the basic functions well, but also have additional tools that add so much value to a phone. Redmi Note 9 Pro performed slightly worse in the front camera, fast charger and the screen, which could be a second choice with limited budget, while Samsung A51 stands out with its brand impact, and with no other obvious strength.


Nestle Nigeria - Supply chain disruption amid high inflationary environment dampen profitability - Brand Spur
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