... records a profit before tax of N12.46 billion in Q3, 2023
That Nestlé Nigeria, a global food and beverage powerhouse in Nigeria has been able to weather the storm of the last nine months qualified to be a course of study in Higher Institutions of learning.
The Nigerian economy was negatively impacted by the Naira liquidity crunch of first-quarter (Q1) 2023, which had a more telling effect on the informal economy and resulted in moderated GDP growth of 2.31percent (versus 3.52percent in Q4’2022). The tamer growth is behind our projection of 2.6percent and Bloomberg’s consensus of 2.8percent.
Despite the inflation and foreign exchange imbroglo, Nestlé Nigeria recorded a revenue of N134.82 billion during the quarter, thus modifying the group’s nine-month earnings to N396.59 billion, representing a year-on-year increase of 18.93% from the corresponding period in 2022.
Although, for the nine months up to September 30, 2023, the company’s pre-tax profit fell by 197% year-on-year, showing a pre-tax loss of N56.66 billion in contrast to the N58.39 billion pre-tax profit during the same period in 2022. They are currently facing currency risk from sales, purchases, and borrowings made in currencies other than its main currency, the Naira.
The company is also facing a net currency risk exposure of $439.98 million, €30.43 million, and CHF 3.35 million, among others.
The cost of sales also increased to N236.4 billion in the nine-month period of 2023, up from N216.2 billion in the same period of 2022. An increase that was attributed to inflation and FX pressures.
And according to CSL stockbrokers, despite the company’s ability to source most of its raw materials locally, the Cost of Sales that was adjusted for depreciation yielded to inflation and FX pressures as it advanced by 9.36% y/y to N236.42bn in 9M 2023 from N216.19bn in 9M 2022,
However, there was an 18.9 percent increase in their total revenue, which reached N396.6 billion, up from N333.5 billion in the same period of 2022.
Nestle’s food products and beverage segments showed growth, with a 27.0 percent increase to N254.38 billion and a 6.8 percent increase to N142.21 billion in the nine months of 2023.
In the third quarter of 2023, the company’s revenue marginally increased by 0.8 percent to N134.82 billion, compared to N90.15 billion in Q3 2022.
Nestle’s operating expenses also experienced growth, rising by 31 percent to N68.6 billion in the period under review from N52.4 billion recorded in the same period of 2022.
This increase was driven by an increase in marketing & administrative expenses and selling & distribution expenses, which rose by 35.98 percent and 4.97 percent respectively
Nestle’s finance income also increased by 221.27 percent to N8.29 billion, driven by a net exchange gain of N4.58 billion in nine months of 2023, compared to N603.11 million in the same period of 2022.
The consumer goods firm saw its finance Income surge by 221.27 percent to N8.29 billion from N2.58 billion driven by N4.58 billion in net exchange gain in nine months of 2023 from N603.11 million recorded in the same period of 2022.
Nestle’s cash flow for the nine months can be summarized as follows:
... Net cash from operating activities amounted to N53.3 billion;
... Net cash used for investing activities amounted to N26.6 billion;
... And net cash from financing activities amounted to N7.6 billion.
Their cash and cash equivalent for the period amounted to N152.7 billion, up from N107 billion recorded in the same period of 2022.
Key Highlights Q3 2023 vs Q3 2022
Revenue: N134.82 billion, +21.44% YoY
Cost of sales: N81.99 billion, +10.88% YoY
Gross profit: N52.84 billion, +42.49% YoY
Marketing and distribution expenses: N18.57 billion, +23.58% YoY
Administrative expenses: N3.47 billion, +3.41% YoY
Operating profit: N30.79 billion, +64.71% YoY
Net finance cost: N18.33 billion, +352.68% YoY
Profit before tax: N12.46 billion, -14.92% YoY
Profit for the period: N6.91 billion, -44.25% YoY
Earnings per share: N8.72, -44.28% YoY
Total assets: N499.94 billion, +20.45% YTD
This impressive Q3 2023 was as a result of some of the innovative decisions taken by the company.
Some of the innovative steps taken by Nestlé to achieve impressive Q3 2023 results
... shift to locally produced raw materials. Like replacing corn starch with cassava.
... using 100% locally sourced Nigeria products like soyabeans.
... including issuing letters of intent to suppliers.
... providing technical expertise.
... engaging with local authorities to establish quality standards.
... offering of financial assistance through advance payments.
... Nestle is also striving to develop local suppliers for spices, which it traditionally imports from Asia so as to relive the pressure of fx.
The company looks healthy and optimistic for a bullish turnover as they continued to embrace innovations in sourcing for 100% locally manufactured food products in response to growing pressure on foreign exchange reserves in African countries and the over rising import cost, the company is replacing imported food supplements like corn starch with cassava so as to help local suppliers to increase capacity and improve quality and also reduce pressure on foreign exchange.
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