March 2, 2022/CSL Research

In its recently released audited results, Nestle Nigeria Plc grew topline by 22.6% y/y to N351.8bn in FY 2021 from N287.1bn in FY 2020. In Q4 alone, growth in Revenue was relatively flattish, up marginally by 0.1% q/q to N90.2bn. The food sub-segment, which contributed 59.2% of the total Revenue, recorded  double-digit growth in the period, up 21.3% to N208.3bn in FY 2021. Similarly, the beverages sub-segment which accounted for 40.8% of Revenue grew 24.4% y/y to N143.5bn. Export sales increased, up 19.9% to N5.3bn in 2021 from N4.4bn in 2020.

Cost of Sales (adjusted for depreciation) outpaced the growth (22.6% y/y) in Revenue, up 31.7% to N214.9bn from N163.2bn. We observed that most cost increases in the period came from Q3 and Q4 as there was a 41.6% y/y and 35.1% y/y rise in the cost line, respectively – a period that coincides with the rising international price for cocoa and shortages in the foreign exchange market. Though Nestle is one of the six businesses allowed by CBN to access FX through the official window, limited supply within the space necessitated the outsourcing of FX from the parallel market. In addition, local prices for items such as Maize, which goes into its production process, were also on the rise. Consequently, Gross Profit rose moderately, up 10.5% y/y while Gross Margin shed 4.2ppts to 38.9% in 2021 from 43.1% in 2020.

Operating Expenses (adjusted for depreciation) was up 9.3% y/y to N56.5bn from N51.7bn in 2020. The rise in OPEX was driven by growth in both Marketing & Distribution (adjusted for depreciation) and Administrative Expenses (adjusted for depreciation), both of which were up by 9.8% y/y and 7.4% y/y, respectively in the period. Given the sub inflationary growth, EBITDA increased by 11.4% y/y growth to N80.4bn from N72.2bn in the prior period.

Operating profit grew 11.7% y/y to N72.0bn in 2021 from N64.4bn in 2020. Net Finance Cost rose by 166.9% due to a 172.8% y/y growth in Finance Cost to N12.1bn despite the significant growth in Finance Income (up 207.3% y/y to N2.0bn). As a result, growth in PBT slowed, rising by 2.0% y/y to N61.9bn in 2021 from N60.6bn in 2020. Effective Tax Rate remained at 35.3% in 2021. Further, Net Income grew by 2.1% y/y to N40.0bn in 2021 from N39.2bn in 2020.

The firm also proposed a final dividend of N25.50/s, bringing total dividend to  N50.5/s for the year, implying a dividend yield of 3.5% based on the last closing price of N1435.0/s.

Our numbers and estimates are under review. Current Price: N1,435/s.

 NESTLE FY 2021