March 1, 2023/CSL Research

Nestle Nigeria plc’s full year 2022 numbers showed a strong growth in Revenue, up 27.0% y/y to N446.82bn (FY 2022) from N351.82bn (FY 2021). This was supported by growth in both the Food Products and Beverages segments. Maggi seasoning, cerelac, nan and other household names in the company’s Foods category retained a dominant position, contributing 60.9% to total Revenue and up 30.6% y/y to N271.99bn (FY 2022) from N208.28bn (FY 2021). Also, the household delight, milo, nescafe, pure life, and their recent variants in the beverages segment contributed 39.1% to total Revenue while growing 21.8% y/y to N174bn (FY 2022) from N143.53bn (FY 2021). However, on a q/q basis, Revenue grew marginally by 2.1% to N113.35bn in Q4 2022 from N111.02bn recorded in Q3 2022. While the Beverages segment grew by 5.8% to N71.73bn in Q4 2022 from N67.81bn recorded in Q3 2022, food products declined by 3.7% to N41.61bn in Q4 2022 from N43.21bn recorded in Q3 2022. We believe the increase in Revenue was driven by both price and volume growth.

Despite the company’s ability to source c.80% of its raw materials locally, the Cost of Sales (adjusted for depreciation) yielded to global inflation and local FX pressures as it grew faster than Revenue, up 32.8% y/y to N284.23bn in FY 2022 from N214.10bn in FY 2021. Consequently, Gross Margin shrank to 36.4% in FY 2022 from 39.1% in FY 2021. However, Gross Profit was up 18.1% y/y to N162.59bn in FY 2022 from N137.72bn in FY 2021.

Operating Expenses (adjusted for depreciation) remained under control as Administrative Expenses (adjusted for depreciation) declined marginally by 0.9% to N10.56bn in FY 2022 from N10.65bn in FY 2021. However, Marketing & Distribution Expenses (adjusted for depreciation) increased by 19.3% to N55.38bn in FY 2022 from N46.42bn in FY 2021. The management continued its products innovations and campaigns, introducing Nescafe Malty, a blend of Nescafe 3-in-1 and malt in 2022. Consequently, EBITDA ticked northward by 20.7% y/y to N96.62bn in FY 2022 from N80.38bn in FY 2021. However, EBITDA Margin declined by 1.2ppts to 21.6% in FY 2022 from 22.8% in FY 2021. The decline in EBITDA Margin was largely driven by the increase in Cost of Sales.  

Depreciation & Amortisation increased by 16.0% y/y to N9.75bn in FY 2022 from N8.41bn in FY 2021. Despite the absence of Other Income, Earnings Before Interest and Tax (EBIT) grew higher by 20.7% y/y to N86.87bn in FY 2022 from N71.97bn in FY 2021.  

The company’s Finance Income jumped 140.4% to N4.77bn in FY 2022 from N1.99bn in FY 2021 as Cash and Cash Equivalents increased by 17.32% to N117.93bn in FY 2022 from N100.52bn in FY 2021. We believe the management may have negotiated better interest rates on balances with the banks in line with the rising rate environment. On the flip side, Interest Expense increased by 72.7% to N12.68bn in FY 2022 from N7.34bn in FY 2021 as long-term Loans & Borrowings increased by 92.33% to N147.01bn in FY 2022 from N76.43bn in FY 2021. Meanwhile, the company recorded exchange rate loss of N7.85bn in FY 2022 compared with to N4.74bn in FY 2021. Accordingly, Finance Cost leaped by 70.0% to N20.53bn in FY 2022 from N12.08bn in FY 2021. Overall, Net Finance Loss increased by 56.2% to N15.75bn in FY 2022 from N10.09bn in FY 2021. 

Overall, Net Profit grew by 22.3% y/y to N48.97bn in FY 2022 from N40.04bn in FY 2021. The company’s management declared a final dividend of N36.50/s with April 21, 2023 as qualification date. This amounts to a total dividend of N61.5/s in 2022 and dividend yield of 5.7% 

Our estimates are under review. Current Price: N1,080.30

Nestle Nigeria, FY 2022 (Nm)

Source: Company, CSL Research