MON, OCT 30 2023-theGBJournal| Nestle Nigeria Plc (NESTLE) published its Q3-23 unaudited results on Friday, reporting a 44.3% y/y decrease in Q3-23 standalone PAT with an EPS of ]N8.72 (Q3-22: N15.65).
The EPS decline in the quarter was primarily due to the substantial FX loss (N3.67 billion | gain of N431.81 million in Q3-22). However, the company reported a loss per share of N54.33 in 9M-23 (vs EPS of N50.66 in 9M-22).
Revenue grew solidly by 21.4% y/y in Q3-23, with the bulk of the weight pulled by the Food (+29.9% y/y | 65.4% of revenue) segment, while the Beverages (+8.1% y/y | 34.6% of revenue) segment showed slower growth.
Sequentially, revenue grew marginally by 0.8% q/q, underpinned by a moderate expansion in the Food (+3.5% q/q) segment and a decline in Beverage (-4.1% q/q) sales.
Analysts believe the group’s topline growth was price-driven as our Q3 pricing survey indicated that average prices in the Food and Beverage segments saw an uptick of c.10.0% and c.12.0%, respectively.
Gross margin expanded significantly by 579bps y/y to 39.2% in Q3-23, driven by solid revenue performance. As a result, both EBITDA (+604bps y/y) and EBIT (+600bps y/y) margins also expanded to 25.1% and 22.8%, respectively, despite a 19.9% y/y increase in operating expenses – marketing and distribution expenses (+23.6% y/y).
Further down, NESTLE’s net finance cost increased significantly by 352.7% y/y in the quarter, owing to the substantial finance costs (+792.2% y/y) in the period.
The higher finance costs stemmed from the increase in interest expenses on financial liabilities (+495.2% y/y) and net foreign exchange loss of NGN3.67 billion (vs gain of NGN431.81 million in Q3-22) in Q3-23, reflecting the impact of the naira devaluation.
Overall, PBT declined by 14.9% y/y to N12.46 billion in Q3-23. Following a tax expense of N5.55 billion (+147.1% y/y), profit after tax (-44.3% y/y) declined to N6.91 billion in Q3-23.
”Although revenue growth remained robust and operating margins improved substantially in the period, we remain concerned about the effects of FX challenges on the company’s earning” says Cordros Research analysts.
Cordros also sees scope for sustained revenue growth over the rest of the year, given NESTLE’s strong brand equity and commitment to product innovation amid stiff competition from unlisted cheaper brands.
”YTD, NESTLE performance (-1.2%) has been lacklustre compared to the Consumer Goods index (+94.3%) and the broader All-Share index (+31.0%). We anticipate a neutral market reaction to the result,” they added.
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