TUE. 28 FEB, 2023-theGBJournal| Nestle Nigeria Plc revenue grew solidly by 27.0% y/y in 2022FY (2021FY: +22.6% y/y), underpinned by substantial growth across the company’s Food (+30.6% y/y | 60.9% of revenue) and Beverage (+21.8% y/y | 39.1% of revenue) segments, reflecting consumer’s resilient demand for NESTLE’s products.
We believe price increases implemented across the company’s product portfolio drove the strong growth in these segments.
However, gross profit margin shrank by 261bps to 34.9% in 2022FY (2021FY: 37.5%) driven by the surge in cost of sales (+32.3% y/y). We highlight increased inflationary pressures on domestic food prices (2022 average: 20.83%) as the key driver, as NESTLE currently sources c. 80% of its raw materials locally.
Similarly, EBITDA and EBIT margins declined by 101bps and 122bps to 19.4% and 21.6%, respectively, in 2022FY following the contraction in gross margin and a 15.6% y/y expansion in operating expenses. The higher OPEX was triggered by an increase in the marketing (+19.2% y/y) expense line.
Net finance costs grew by 56.2% y/y consequent upon a 70.0% y/y increase in finance costs amid a 140.4% y/y growth in finance income. The growth in finance cost was underpinned by the higher interest expense (+72.7% y/y) recorded, following increased borrowings during the period, and a 65.8% y/y growth in net foreign exchange loss. We highlight that the company’s total debt increased to NGN155.30 billion in 2022FY (2021FY: NGN76.86 billion).
Notwithstanding, PBT grew by 14.9% y/y to N71.11 billion in 2022FY (2021FY: N61.88 billion). Following a tax expense of N22.14 billion, PAT printed NGN48.97 billion (2021FY: N40.04 billion).
The company’s audited financials published today showed a 22.3% y/y growth in the company’s EPS to N61.77 in 2022FY (2021FY: N50.51), given the accelerating topline growth (+27.0% y/y). On the 2022FY EPS of N61.77 (0.7% below our estimates), the board has proposed a final dividend of N36.50/s translating to a yield of 3.4% based on the last closing price of N1080.30/s (27 February).
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