Connect with us
Gage

Columnists

Nestle Plc: FY 2019 Revenue beats estimate; but profit underperforms

Nestle Plc released its FY 2019 audited numbers where the company recorded a 6.7% y/y increase in Revenue to N284.0 billion from N266.3 billion in FY 2018.

Published

on

Why Nestle Nigeria’s return remains strong - EFG Hermes, Nestle Nigeria Plc appoints new Director, Nestle Plc: FY 2019 Revenue beats estimate; but profit underperforms, GTB, Zenith Bank, & Nestle emerge as Renaissance Capital’s top stock picks, Nestlé’s parent company acquires additional shares worth ₦300 million

Nestle Plc released its FY 2019 audited numbers where the company recorded a 6.7% y/y increase in Revenue to N284.0 billion from N266.3 billion in FY 2018. On a q/q basis, Revenue grew 4.7% q/q to N72.7 billion in Q4 2019 from N69.4 billion in Q3 2019. The growth in Revenue was driven by improved sales growth across Food (up 4.7% y/y to N176.1 billion) and Beverage (up 10.0% to N107.9 billion) business segments.

We note reported Revenue of N284.0 billion beat our 2019e of N278.2 billion by 2.1%. In addition, we note the company recorded a rebound in q/q Revenue growth following two consecutive quarters of disappointing performances.

Nestle releases FY financial statement for 2019, proposes huge dividend

Cost of Sales (ex-depreciation) grew by 2.1 y/y to N150.3 billion in FY 2019 from N147.2 billion in FY 2018, which was slower than the growth in Revenue. We believe the moderate growth in Cost of Sales was driven by flattish growth in Factory Overheads and steep decline in Other expenses line item as Raw material costs for the year was higher by 6.3% y/y.

We note key raw materials saw minimal price pressures in the first half of 2019 although pressures ramped up towards the end of the year. Nevertheless, minimal average price growth helped keep Raw material cost growth moderate. Against the backdrop of lower y/y growth in Cost of Sales, Gross Profit increased by 12.3% to N133.7 billion in FY 2019 from N119.1 billion in FY 2018 while Gross margin climbed 2.4ppts in FY 2019 to 47.1%.

Specta

[READ MORE: Dangote Cement retains BUY status despite weak revenue)

Nestle recorded a 5.2% y/y increase in Operating Expenses (adjusted for depreciation) to N54.2 billion in FY 2019 from N51.6 billion in FY 2018. The increase in Operating Expenses was driven largely by growth in Marketing & Distribution expenses adjusted for depreciation (up 5.9% y/y) and Administrative Expenses adjusted for depreciation (up 2.0% y/y).

We attribute the growth in Opex to increased spending on distribution and sales promotion activities. Slower growth in Operating Expenses compared to Gross Profit drove EBITDA higher by 17.7% y/y to N79.5 billion in FY 2019 from N67.5bn in FY 2018. However, EBITDA was lower within in Q4 compared to Q3, down 6.1% q/q.

Deal book 300 x 250

Depreciation & Amortisation rose 7.9% y/y to N7.5bn in FY 2019 from N6.9 billion in FY 2018. Nevertheless, EBIT climbed 18.8% y/y to N72.1 billion in FY 2019 from N60.6 billion in FY 2018. Net Finance Cost climbed 5.4% y/y to N938.2 million despite lower Finance cost (down 13.0% y/y) as Finance income dipped 22.6% y/y on lower Cash and yield environment.

Coronation ads

Nevertheless, Pre-Tax Profits grew 19.0% y/y to N71.1bn in FY 2019 from N59.8 billion in FY 2018 which was ahead of our 2019e of N69.8bn. However, higher than expected Effective Tax Rate caused a 51.9% y/y jump in Tax expense to N25.4 billion. Consequently, Net Income printed below our 2019e of N50.3 billion to settle at N45.7bn which represents a 6.2% y/y growth from N43.0 billion in FY 2018. Earnings per Share printed at N57.63/s in FY 2019 (CSL Estimate – N60.23/s)

The company announced final dividend of N45.0/s (bringing total dividend for the year to N70.0/s) which implies a dividend yield of 4.0% based on Friday’s closing price of N1,130/s. We have a HOLD recommendation on the stock with a target price of N1,356.97/s.

Nestle Plc: FY 2019 Revenue beats estimate; but profit underperforms

_______________________________________________________________________

Coronation ads

CSL STOCKBROKERS LIMITED CSL Stockbrokers,

Stanbic IBTC

Member of the Nigerian Stock Exchange,

First City Plaza, 44 Marina,

Jaiz bank ads

PO Box 9117,

Lagos State,

NIGERIA.

Click to comment

Leave a Reply

Your email address will not be published.

This site uses Akismet to reduce spam. Learn how your comment data is processed.

Columnists

Nigeria’s high recurrent costs, low revenue and escalating debt numbers

Nigeria continues to face issues of poor revenue generation and a lack of will to efficiently manage its expenditure.

Published

on

Debt, Fitch downgradesS&P downgrades Nigeria, Nigeria’s credit rating faces downgrade by Fitch, Oil price crash, Coronavirus: The trouble that lies ahead for Nigeria, Avoiding 2016: What Nigeria should do to fight the coming economic storm, Fitch downgrades, federal government (FG)

In the recently released Q3 2020 debt report by the National Bureau of Statistics, the total public debt was N32.22trn as of 30 September 2020, with local debt making up 62.18% of the total public debt in the period while external debt made up 37.82%.

This is similar to the country’s debt structure in the same period of 2019 when domestic debt made up 68.45% of total public debt and external debt made up 31.55%. Whilst debt to GDP ratio remains within the acceptable threshold, we are increasingly concerned about the nation’s ballooning debt service to revenue ratio.

READ: U.S. budget suffers a deficit of $3.1 trillion in 2020, as pandemic slams the economy

Recall that the Federal Government of Nigeria following a series of revisions to the 2020 appropriation bill arrived at a fiscal deficit of N4.98trn. Based on the finance ministry data, an aggregation of debt monetization (N2.86trn) and New borrowings (N3.28trn) was used to finance the deficit.

READ: Heads of defaulting revenue generating agencies will be severely sanctioned – Buhari

Specta

The 2021 appropriation bill forecasts a budget deficit of N5.60tn which would be financed mainly by borrowings of N4.69tn, privatization proceeds of N205.15bn and project linked bilateral & multilateral loans of N709.69bn. The country’s financing structure is of concern when one considers that the budget is tilted more towards recurrent expenditure than capital expenditure and raises questions on the sustainability of the current fiscal practices.

READ: FG directs the suspension of NIMC staff involved in extortion of NIN applicants

The significantly higher recurrent component of the budget continues to drag the country’s economic growth, resulting in poor infrastructural development. Spending more on capital projects can promote industrialization, improve local purchasing power and help the federal government’s diversification drive.

READ: NEM Insurance CEO/MD purchases 4 million additional shares worth N9.2 million

Coronation ads

Nigeria continues to face issues of poor revenue generation and lack of will to efficiently manage its expenditure. No significant cuts have been made to its overheads and statutory spending has continued to rise. Nigeria’s growing debt stock with little to show for it in terms of capital expenditure remains a major concern.

READ: Nigeria’s total public debt stock increased by N2.381 trillion in 3 months


CSL Stockbrokers Limited, Lagos (CSLS) is a wholly owned subsidiary of FCMB Group Plc and is regulated by the Securities and Exchange Commission, Nigeria. CSLS is a member of the Nigerian Stock Exchange.

Coronation ads

Stanbic IBTC
Continue Reading

Columnists

How Africa’s youth contribute to the African society

The growth of technology has created an opportunity for several African youths to come up with new innovations.

Published

on

Africa has been called a lot of names – dark continent, the savage, the continent of Safaris, third world, emerging market continent and more recently, Sh**hole, but it is hardly called the Continent of Youths.

It is not a secret that the youths are the future of the African continent. They are already emerging and will be the next thought leaders, creators and innovators that will help galvanize the African continent to greater heights.

According to the United Nations in 2015, Africa has 226 million youth aged 15-24 and one-fifth of the world’s youth population. This means that one out of every five youth on earth is from Africa. The African Youth population is forecasted to grow by 42% by 2030. There should be a new focus on the youth in Africa, as we examine how much they contribute currently to the continent.

One area where youth are thriving well in Africa is in the tech sector. The sector has become an interesting source of Foreign Direct Investments and in 2019 accounted for close to half a billion-dollar raked into the continent. In 2020, – the Paystack/Stripes deal brought in about 200 million dollars. The growth of technology has created an opportunity for several African youths to come up with new innovations, which are even more helpful in the current fledging economic and social climate affected by the pandemic.

There are several examples of many African youths using technology to start new ventures. Mike Endale, an Ethiopian American based in Washington, D.C, who is the principal at BLEN Corp, an information technology firm that leads the Ethiopia COVID-19 Emergency Tech Volunteer Task Team and assists Ethiopia’s Ministry of Health. During the pandemic, they have recruited over 1,700 software engineers and have even created an Africa COVID-19 response toolkit.

Specta

Temie Giwa-Tubosun, the founder of LifeBank in Nigeria, is another African youth making strides in the tech scene. Since its establishment in 2016, it helps to deliver 22,830 units of blood, according to Next Billion, to hospitals in Nigeria, which help connect donors to blood banks. Next Billion also stated that LifeBank conducts drive through COVID-19 testing and supply oxygen to health centers. The Lifebank recently expanded in East Africa. In December 20280, the US- Africa Business Center of the US Chamber in conjunction with the American Business Council Nigeria in recognition of the great impact of start-ups in the wake of the Pandemic, inaugurated a digital entrepreneurship competition.

African youths are also thriving in the entertainment sector, particularly in the music business.  The Afrobeats genre continues to rule the music world and the likes of Burna Boy, Davido, Mr. Eazi and Omah Lay, who are still in their 20’s, spearhead and remain the face of the genre. The international recognition of Afrobeats has given artists more visibility on the global forefront. This was the case for Davido, Mr. Eazi and Tiwa Savage, who were featured on the cover of the Billboard magazine. Music remains of significant importance and the youths are a big factor to the success of the industry.

In Nigeria, the music revenue grew from $26 million in 2014 to $34 million dollars in 2018, according to Statista. The music revenue in Nigeria is expected to increase to $44 million by 2023 as reported by Statista.

Africa’s youth are also flying high in the area of sports, particularly in soccer. Wilfred Ndidi and Kelechi Ihenacho of Nigeria (both players at Leicester City in the English Premier League) come to mind. Also, Percy Tau, a South African soccer player, who was with R.S.C Anderlecht in Belgium, will now be returning to his parent club, Brighton & Hove Albion in the premier league. Tau plays in a forward position and he is expected to make his debut for the seagulls (Brighton & Hove Albion) in the 2020-21 season of the premier league.

Coronation ads

Lastly, youths in Africa have also been influential on the activism forefront, especially in the last couple of years. This was evident in October of 2020, when several Nigerian youths took to the streets to fight against police brutality in the End SARS protests. In Uganda, Musicians like Bobi Wine’s foray into Politics first as a parliamentarian and presidential candidate is attracting more youth to get into politics.

Other youths like Christelle Kwizera, founder of Water Access Rwanda, have been involved in helping communities with access to water. According to Global Citizen, Kwizera’s plan is to eradicate water scarcity and to provide clean water for people in local communities. Currently, her organization has supplied 70,000 people in Rwanda with clean water. Kwizera’s efforts earned her the Cisco Youth Leadership Award at the 2020 Global Citizen Prize.

African youths definitely have a lot to offer in several sectors and this would be vital to the growth of the continent. African governments need to understand this and invest meaningfully and in a sustainable way on the youth population to reduce the migration drain.

The enthusiasm, the work rate, and efforts are why the current children of Africa have an opportunity to be wonderful leaders of tomorrow. With the right nurturing environment in place, Africa’s future is in safe hands.

Coronation ads

 

Stanbic IBTC

Written by Paul Olele

Jaiz bank ads
Continue Reading

Columnists

World Bank’s global outlook amid COVID-19 surge

The World Bank’s projection for Sub-Saharan Africa (SSA) is expected to grow by 2.7%, while the expected growth for Nigeria is set at 1.1% in 2021.

Published

on

Recently, the World Bank published its January 2021 global economic prospects. The bank expects global growth to expand by 4% in 2021 from an estimated 4.3% contraction in 2020.

In the report, the World Bank expressed concerns about the recovery phase of many economies, especially the emerging and developing economies except policymakers can put in place robust and comprehensive policy framework to improve the existing frail business and economic environment caused by the unprecedented coronavirus pandemic.

The bank’s growth projection for advanced economies (AEs) and emerging & developing economies (EMDEs) including China was 3.3% and 5.0% in 2021 respectively. Sub-Saharan Africa (SSA) is expected to grow by 2.7%, while the expected growth for Nigeria is set at 1.1% in 2021.

The World Bank appears less optimistic about the growth prospects across the globe including Nigeria as many countries are enfeebled as a result of the ripple effect of the pandemic causing elevated debt levels, rising unemployment and with the new strain of Covid-19 in many countries resulting in renewed lockdowns and restrictions, growth estimates may not be met. The bank stresses that quicker vaccination process across the world would aid faster economic growth which could step up to 5%, while a possible delay in rollout of vaccines amid rising infections could hamper growth expansion to 1.6% in 2021.

The prospect of quick vaccination appears a little bleak to us at this time. To give perspective, according to the Center for Disease Control (CDC) a few days ago, only 6.7 million Americans had received at least the first dose of the vaccine and that is roughly 2% of America’s population in 2 months.

Specta

The bank extended its weakened optimism to Nigeria as the country faces severe pressures from dwindling oil revenues, weak private investments, eroding consumer spending power and declining foreign investor participation.

In our opinion, restoring the economy to the path of sustainable growth requires government’s conscious efforts in addressing structural challenges impeding growth in the economy.


CSL Stockbrokers Limited, Lagos (CSLS) is a wholly owned subsidiary of FCMB Group Plc and is regulated by the Securities and Exchange Commission, Nigeria. CSLS is a member of the Nigerian Stock Exchange.

Coronation ads

Continue Reading
Advertisement




Advertisement