October 30, 2023/CSL Research

Nestle Nigeria Plc’s (Nestle) Revenue advanced by 18.93% y/y to N396.59bn in its 9M 2023 earnings from N333.47bn in the corresponding year. The company’s Revenue performance was buoyed by the 19.88% y/y growth in its domestic sales to N396.10bn. However, Nestle’s export sales pared significantly, down 83.10% y/y to N488m in 9M 2023 from a whooping N2.89bn in 9M 2022. Nestle’s food products and beverage segments showed growth, up 27.0% and 6.8% y/y to N254.38bn and N142.21bn in 9M 2023. In Q3, the company’s Revenue increased marginally by 0.8% q/q to N134.82bn in the period from N133.8bn in Q2 2023, supported by a 3.5% q/q growth to N88.11bn in its food segment. However, the beverage segment declined by 4.1% q/q to N46.71bn from N48.70bn in Q2 2023.

NESTLE 9M 2023

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Source: Company’s Financials, CSL Research.

Despite the company’s ability to source most its raw materials locally, the Cost of Sales (adjusted for depreciation) yielded to inflation and FX pressures as it advanced by 9.36% y/y to N236.42bn in 9M 2023 from N216.19bn in 9M 2022. Q/q, Cost of Sales also advanced by 9.1% to N79.83bn in Q3 2023 from N73.16bn in Q2 2023. Nestle’s Gross Profit rose to N166.17bn (+35.93 y/y) in 9M 2023 whilst its Gross profit waned by 9.3% q/q to N55.0bn in Q3 2023 from N60.64bn in Q2 2023 due to the hike in its Cost-of-Sales compared with the marginal quarterly growth performance. Nestle’s Gross Profit settled at 41.9% in 9M 2023 which is 5.2ppts higher than the 36.7% recorded in 9M 2022 whilst its Gross profit margin was 40.8% in Q3 2023, lower than the 45.3% recorded in Q2 2023.

Operating Expenses (adjusted for depreciation) remained elevated, exacerbated by the growths of 35.98% and 4.97% y/y to N58.03bn and N7.99bn in 9M 2023 in its Marketing & Administrative Expenses (adjusted for depreciation) and Selling & Distribution Expenses (adjusted for depreciation) respectively. Following through, the company’s EBITDA advanced by 39.18% y/y to N100.15bn in 9M 2023. Its Depreciation & Amortisation also increased by 20.94% y/y to N8.56bn in 9M 2023 from N7.08bn in 9M 2022. In the absence of Other Income, Earnings Before Interest and Tax (EBIT) grew by 41.17% y/y to N91.59bn in 9M 2023 from N64.88bn in 9M 2022.

The company’s Finance Income surged by 221.27% y/y to N8.29bn (9M 2023) from N2.58bn (9M 2022) driven by N4.58bn in Net exchange gain in 9M 2023 from N603.11m in 9M 2022. However, Nestle’s Net Finance Cost settled at N148.24bn in 9M 2023 (vs N6.49bn in 9M 2022) driven by the exponential rise in its Finance Cost to N156.53bn in 9M 2023 from N9.07bn in 9M 2022 due to the net exchange rate difference on the company’s foreign currency denominated balance. Consequently, the company recorded a Loss Before Tax of N56.66bn in 9M 2023 whilst its Loss After Tax came in at N43.07bn in 9M 2023 due to the income tax credit of N13.59bn. However, the company’s financials did reflect that there was a comeback in Q3 2023 as the company reported Profit Before Tax of N12.46bn from a loss of N94.02bn in Q2 2023.

Despite the overall downturn in its bottom-line performance, we still have a price target of N1,414.70/s and a buy recommendation on Nestle. Our price target implies an upside potential of 34.73% from the current price of 1,050.00/s.

Kindly click on the below link to download the full report.

​CSL Nestle Nigeria 9M 2023 Quick Take.pdf​