Sell pressure witnessed on the shares of Nestle Nigeria Plc since the beginning of the year has resulted in investors of the company losing about N124.05 billion at the close of trading on 13th July.
Checks by Nairametrics showed that the consumer goods stock dropped by 10% to N1,400 per share from N1,556.00 which was the opening share price in January.
Further analysis showed Nestle closed its last trading day (Wednesday, July 13, 2022) at N1,400 per share and N1.109 trillion in market capitalisation on the Nigerian Exchange Group (NGX) as against N1,556 per share and N1.233 trillion in market capitalisation at the beginning of trading in January 2022, hence has earned a loss of N124.050 billion or 10 % year to date.
This is despite the sector witnessing an improved performance in Q1 2022 on various parameters like credit growth, asset quality, and profitability.
The relentless sale pressure by Foreign Portfolio Investors (FPIs) is on the back of high commodity inflation that happened due to the Russian-Ukraine War, which led to a spike in interest rates and, in turn, led to a jump in bond yields in the US and other developed markets.
Foreign institutional investors invest in Nigeria stocks or other emerging markets when they have excess liquidity (low borrowing costs). However, if bond yields rise in the US, money will move away from emerging markets.
Following low sentiment from FPIs, analysis from the NGX has shown that foreign transactions stood at N201.29 billion, accounting for about 13.37% of the total transactions carried out from January to May, while domestic transactions constituted N1.304 trillion, representing 86.63 per cent of the total transaction, outperforming the foreign investment during the same period.
Key results highlights
- A breakdown of the results shows that from January to March 2022 (Q2), Nestle recorded revenue of N110.2 billion against N87.3 billion during the same period in the previous year, showing a top-line growth of 26.3%.
- Cost of Sales stood at N 66.982 billion for year 2022 in review against N52.514 billion recorded the previous year while gross profit stood at N43.242 billion against N34.742 billion of the year 2021.
- Meanwhile, Marketing and Distribution recorded expenses of N14.224 billion against N11.109 billion in the year 2021, while the Administrative expenses was at N2.615 billion less than N3.319 billion recorded in the previous year.
- Results from operating activities stood at N26.402 billion against N20.314 billion in 2021. The profit before income tax stood at N 27.851 billion for the year 2022 against N19.002 billion recorded in 2021 as Income tax expense stood at N9.871 billion against N6.602 billion of the previous year. However, profit for the period in review stood at N17.980 billion against N 12.400 billion made in 2021.
What the company is saying
- Commenting on the results, the Managing Director and CEO of Nestlé Nigeria Plc, Mr. Wassim Elhusseini said, “On behalf of the management and staff of Nestlé Nigeria PLC, I am delighted to present this impressive performance of our company in the first quarter of 2022. I commend the efforts of the entire team at Nestlé Nigeria PLC, for continuing to thrive under the current difficult business environment.
- “We know that the global economic situation and supply chain disruptions will continue to put more pressure on the already challenging business environment. However, we remain optimistic that we can continue to improve our business by empowering our people and ensuring continued supply of essential nutritious food and beverages to consumers.
- “We will continue to focus on these two important areas while caring for our communities and business partners, and all collaborators across our value chains to sustain this growth throughout the year”.