Nestle Nigeria – Beverage to outpace Food Revenue Growth

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We expect Nestle Nigeria’s 9M’20 revenue to dip 0.6% y/y to ₦211.3 billion. Although we expect Revenue from Beverages to sustain its current growth momentum in H1 (+2.5% y/y), we see the company’s food Revenue declining this quarter, following strengthened volume roll-out from the key competition.

Despite sourcing majority of raw materials locally, we estimate a mild decline in gross margin to 42% for 9M’20 from 43% in H1’20, driven by FX pressures.

Nestle Nigeria - Beverage to outpace Food Revenue Growth
Mr Mauricio Alarcon, Managing Director and CEO, Nestle Nigeria PLC while responding to questions during the 21st Edition Milo Basketball Championship Press Conference in Lagos.

On the positive side, however, we expect interest expense to decline further in the period as the company’s debt balance remains suppressed. Overall, we forecast PBT and PAT for Nestle at ₦44.7 billion and ₦28.7 billion (-19% y/y, -22% y/y) respectively in 9M’20.

Nestle Nigeria - Beverage to outpace Food Revenue Growth Brandspurng
Source: Company Fillings, Vetiva Research

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