FSDH Initial Reaction: Nestle Nigeria FY23 results 
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February 29, 2024/CSL Research

Key Performance Highlights:

• Nestle Nigeria reported strong revenue growth of 22.4% YoY to N547.1 billion in FY23. The revenue growth was primarily driven by a 30.0% YoY growth in the Food segment to N353.7 billion, supported by a 10.6% YoY jump in the Beverage segment to N193.4 billion. On the geography front, the revenue growth was driven by a 23.1% YoY increase in domestic revenue to N546.0 billion, while exports declined 65.3% YoY to N1.2 billion in FY23. The company’s cost of sales increased by 13.4% YoY, which was lower than the increase in revenue, to N330.0 billion in FY23 from N291.0 billion in FY22, resulting in a 483 bps gross margin expansion to 39.7% in FY23 compared to 34.9% in FY22. Notably, the company’s solid revenue growth was adversely affected by a significant increase in finance costs, resulting in a N79.5 billion net loss in FY23 versus N49.0 net profit in FY22.
   
• The company’s marketing and distribution expenses increased 28.7% YoY to N73.9 billion, while the administrative expenses surged by 74.1% to N20.1 billion in FY23. Consequently, the operating income grew 42.5% YoY to N123.8 billion in FY23. The company experienced a rise in its finance income to N5.7 billion in FY23. However, the company reported significantly higher finance costs that spurted to N233.5 billion in FY23 compared to N20.5 billion in FY22. The increase in finance cost was primarily due to increased interest expenses to N38.4 billion (vs. N12.7 billion in FY22) and a significantly higher N195.1 billion net foreign exchange loss (vs. N8.5 billion in FY22). Consequently, Nestle Nigeria’s net loss came to N79.5 billion in FY23. Likewise, the company’s loss per share was N100.26 versus earnings per share of  N61.77 in FY22.
   
• Looking at margins, the company’s margins (except for the net margin) increased across the board in FY23. The company’s EBITDA margin increased 314 bps YoY to 24.8% despite considerably higher marketing and distribution expenses and administrative expenses. The operating margin increased 318 bps YOY to 22.6%, while the gross margin was up 483 bps YoY to 39.7% in FY23. The Food segment recorded a 32.3% YoY growth in operating profit to N71.4 billion in FY23, while the Beverage segment’s operating profit rose by 63.9% YoY to N54.0 billion.
   
• In a quarterly performance, the revenue in 4Q23 surged 32.8% YoY to N150.5 billion, while the cost of sales grew by 24.9% YoY to N93.5 billion in 4Q23. Due to finance costs jumping 664.7% to N87.7 billion in 4Q23 and the marketing and distribution expenses increasing 6.8% YoY to N14.9 billion, the company reported a huge net loss of N95.7 billion in 4Q23 compared to a net profit of N8.8 billion in 4Q22. Moreover, the company’s margins (except the net margin) witnessed improvement in 4Q23, with the operating margin expanding by 199 bps, the EBITDA margin expanding by 298 bps.

Market Reaction: Investor’s reaction to the FY23 results was muted as the stock remained unchanged at N990.00 versus a 1.31% fall for the All-Share Index (28/2).

Nestle Nigeria Earnings Highlight FY23

  Source: Company Financials, FSDH