March 3, 2022/FSDH Research
Key Performance Highlights:
- Nestle Nigeria reported strong revenue growth of 22.6% YoY to N351.8 billion in FY21. The revenue growth was primarily driven by a 21.3% YoY in the Food segment to N208.2 billion, supported by a 24.4% YoY jump in the Beverage segment to N143.6 billion. On the geography front, the revenue growth was driven by a 22.6% YoY increase in domestic revenue to N346.6 billion and a 19.9% growth in exports to N5.3 billion. The company’s cost of sales jumped more than revenues at 31.0% YoY, with a majority of the increase coming from an increase in raw materials and consumables cost to N163.7 billion in FY21 from N124.8 billion in FY20, resulting in a 405 bps gross margin contraction to 37.5% in FY21 compared to 41.5% in FY20. The net profit increased by 2.1% YoY to N40.0 billion. Even though there is a strong 22.6% YoY growth in revenue, the 31.0% increase in the cost of the sales and a significant increase in the finance costs led to the deterioration of the net profit margin by 228 bps to 11.4% in FY21.
- The company’s marketing and distribution expenses increased 9.7% YoY to N48.1 billion in FY21. The Administrative expenses also rose by 7.5% YoY to N11.8 billion in FY21. The operating income grew 11.7% YoY to N72.0 billion. The company experienced a rise in its Finance income by 207.3% YoY to N2.0 billion in FY21. However, this increase was offset by the higher Finance costs that rose 2.7x YoY to N12.1 billion. The increase in finance cost was primarily due to a rise in interest expense paid on the financial liability of N7.3 billion in FY21, compared to N2.7 billion paid in FY20, plus a net foreign exchange loss of N4.7 billion in FY21. Resultantly, net profit grew by 2.1% YoY to N40.0 billion in FY21. The company’s earnings per share jumped 2.1% YoY to N50.51 per share in FY21 from N49.47 per share in FY20.
- Looking at margins, the company’s margins declined across the board in FY21. The company’s EBITDA margin declined 229 bps YoY to 22.8% due to the increased cost of sales and marketing and distribution expenses. The operating and net margin slumped 198 bps and 228 bps YoY to 20.5% and 11.4%, respectively. The gross margin has declined 405 bps YoY to 37.5% in FY21. The operating margin and the EBITDA margins have also experienced a dip of 198 bps and 229 bps, respectively. The net profit margin also declined by 228 bps during the year to 11.4% in FY21. The Beverage segment recorded a 13.8% YoY growth in operating profit to N28.3 billion in FY21, while the Food segment operating profit grew 10.4% YoY to N43.7 billion.
- In a quarterly performance, the revenue in 4Q21 increased 21.4% YoY to N90.2 billion. A comparative increase in the cost of sales by 32.2% to N59.7 billion in 4Q21 eroded the increase in revenue. Along with the rise in the cost of sales, a 126.4 % increase in the finance cost to N6.3 billion in 4Q21 contributed to the decline in the net profit to N6.4 billion in 4Q21. Consequently, all the margins have also dropped significantly on a YoY basis, with a decrease in gross margin of 540 bps and a 263 bps decrease in net profit margin.
- On February 28, 2022, Nestle Nigeria proposed a final dividend of N25.50 per share, subject to appropriate withholding tax and approval by shareholders. The final dividend will become payable on Thursday, June 30 2022, to all shareholders registered in the company’s books at the close of business on Friday, May 27 2022. This proposed dividend is in addition to the interim dividend of N25.00 per share that was paid in December 2021, and if approved, the total dividend paid for the year will be N50.50 per share.
Market Reaction: Investor reaction to the mixed FY21 results was restrained as the stock closed unchanged at N1435 versus 0.26% fall the All-Share Index (2/3).
Nestle Nigeria Earnings Highlight FY21
Source: Company Financials, FSDH
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