Nestle posts 3% spike in Q3 revenue on improved sales volume

Nestle Nigeria, the nation’s biggest consumer goods company by market capitalisation, printed a 3.3 percent increase in revenue for three months (July to September) at N71.7 billion, up from N69.4 billion same period in 2019.

Figures from its unaudited financial result for the period ended September 30, show that the increase in revenue rode on the back of a 32.7 percent year-on-year surge in beverage sales, improved volume outturn underpinned by the easing of the lockdown restrictions.

For the three months, cost of sales increased by 8.4 percent at N42.5 billion from N39.2 billion — this is indicative of the weaker currency and much higher local sourcing costs, as the company sources an estimated 80 percent of its raw materials locally.

Marketing and distribution expenses came down slightly at N10.93 billion from N11.03 billion, while administrative expenses dropped slightly at N2.39 billion from N2.58 billion.

Operating profit fell by 4.6 percent year-on-year as the gross profit contraction offset the decline in operating expense at 2.1 percent. Earnings before interest, taxes, depreciation and amortisation (EBITDA) fell by 3.2 percent, equating to an EBITDA margin of 24.8 percent as against 26.5 percent in Q3-19. This implies a contraction of 166 basis points in EBITDA margin.

Net finance costs fell by 8.1 percent as finance income increased 23.96 percent year-on-year, which grew faster than finance costs at 0.58 percent year-on-year.

Despite the preceding, the operating profit weakness drove earnings per share down by 4.6 percent year-on-year to N12.76 in Q3-20.

For the nine months (January to September), revenue stood at N212.73 billion from N211.34 billion. Cost of sales stood at N122.7 billion from N115.03 billion, leaving gross profit at N90.02 billion from N96.31 billion in 2019.

Profit after tax declined at N31.93 billion from N56.55 billion in 2019.

The management also proposed an interim dividend of N25 per 50 kobo of ordinary share.

Shares of Nestle lost 3.29 percent in value so far this year — hitting the lowest price at N765 in March and April following sell-off caused by pandemic.