Nestle Nigeria Plc released its 2015 H1 results reporting 1.9% YoY reduction in revenues for H1 2015 to N65.9 billion while PBT and PAT declined 23.9% and 24.9% YoY to N10.6 billion and N8.9 billion respectively.
Pension Fund Administrator conducted a review of the company’s results and placed a “SELL” on the stock
According to ARM their expectation for Nestlé this year is to keep growing top-line, albeit at a significantly subdued pace as the rising cost of living (following NGN devaluation) continues to soften consumer purchasing power.
They also opined that whilst “benign commodity price outlook should buoy margins, naira weakness relative to FY 14, should continue to temper scale of gross margin expansion as in H1 15.”
” More directly, impact of USDNGN weakness should weigh on bottom-line via finance costs given Nestlé’s high levels of foreign held debt (70% at year end 2014) supporting cautious earnings outlook over FY 15.”
Nestlé currently trades at a P/E of 30.3x vs. 26x for Bloomberg Middle East & Africa peers, with our FVE (N734.40) at 13.6% discount to its last trading price of N850.01.
Based on that they placed a SELL rating on Nestle.
