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Nestle Plc in its recently released 9M 2019 result announced Revenue growth of 4.0% y/y to N211.3 billion for 9M 2019 from N203.1 billion in 9M 2019. On a q/q basis, Revenue fell by 2.1% q/q in Q3 2019 to N69.4bn from N70.9 billion in Q2 2019. Reported Revenue of N211.3 billion missed our forecast of N215.6 billion by a modest 2.0%.

Notably, we have observed consistent decline in quarterly Revenue through 2019 (Q1 – 12.4% q/q; Q2 – 0.0% q/q; Q3 – -2.1% q/q). Thus, while we note y/y Revenue growth has remained sturdy, we feel the company may have started feeling the pressure of weak consumer wallets. Across product segments, both Food (up 2.1% y/y to N131.8 billion) and Beverage (up 7.4% y/y to N53.7 billion) business segments recorded modest growth on a y/y basis.

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Cost of Sales (ex-depreciation) declined 1.8% y/y to N111.1 billion in 9M 2019 from N113.1 billion in 9M 2018, despite the growth in Revenue. We believe lower cost of key products like Cocoa, Sugar and Wheat in H1 2019 supported the decline in Cost of Sales as prices of these materials were slightly pressured in Q3.

This was evident in Q3 Cost of Sales which was up 8.2% q/q and 5.4% y/y to N37.9 billion despite the decline in Revenue. Against the backdrop of lower Cost of Sales y/y, Gross Profit increased by 11.4% to N100.2 billion in 9M 2019 from N90.0 billion in 9M 2018 while Gross margin climbed 3.1ppts in 9M 2019 to 47.4% in 9M 2019.


Nestle recorded a 6.9% y/y increase in Operating Expenses (adjusted for depreciation) to N38.0 billion in 9M 2019 from N35.5 billion in 9M 2018. The increase in Operating Expenses was driven largely by an 8.9% y/y increase in Marketing & Distribution expenses (adjusted for depreciation) to N31.3 billion in 9M 2019 from N28.7bn in 9M 2018. We note the increase in Marketing costs stems from sustained promotional activities for Milo RTD as well as the launch of the new Maggi Signature brand.

Administrative Expenses (adjusted for depreciation) however recorded a modest decline of 1.5% y/y to N6.7 billion in 9M 2019. Slower growth in Operating Expenses compared to Gross Profit drove EBITDA higher by 14.3% y/y to N62.3 billion in 9M 2019 from N54.5 billion in 9M 2018. However, EBITDA was lower within the quarter, down 20.5% q/q.

Depreciation & Amortisation rose 2.0% y/y to N5.2 billion in 9M 2019 from N5.1 billion in 9M 2018. Nevertheless, EBIT climbed 15.6% y/y to N57.1 billion in 9M 2019 from N49.4 billion in 9M 2018. Improved debt position (Total Loans & Borrowings; 9M 2019 – N11.2 billion vs 9M 2018 – N17.5 billion) saw Finance Cost slide lower by 40.9% y/y to N1.6 billion. Despite Finance Income declining 22.6% y/y to N1.1bn, Nestle recorded a 61.0% y/y decline in Net Finance Cost to N496.2 million. Net Profit climbed 11.2% y/y to N36.8 billion in 9M 2019 as against N33.1 billion in 9M 2018. Announced Net Profit missed our estimate of N40.2 billion. Earnings per Share was N46.48/s for 9M 2019 compared to N41.78/s in 9M 2018.

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The company announced an interim dividend of N25.0/s which implies a dividend yield of 2.0% based on yesterday’s closing price of N1,220.

We have a BUY recommendation on the stock with a target price of N1,459.81. Current price: N1,220.0.




Member of the Nigerian Stock Exchange,


First City Plaza, 44 Marina,

PO Box 9117,

Lagos State,



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