Nestle Nigeria generates earning well above levels seen 5 years ago
by BALA AUGIE
March 6, 2018 | 1:33 am| | | Start Conversation
Nestle Nigeria Plc generated Naira earnings well above the levels of the past five years as the company continues to surmount the headwinds brought on by weak consumer spending, rising input costs and currency volatility.
According to the company’s 2017 audited financial statement, net income hit N33.72 billion, which represents a 325.25 surge from N7.92 billion figures recorded in the corresponding period of 2016, which is still higher than the 5.50 percent growth recorded in 2013, when profit was N22.25 billion, as the chart shows.
A price hike across key product line, the introduction of market penetrating products, and the introduction of the flexible exchange by the apex bank helped underpin Nestle’s performance as sales spiked by 34.21 percent to N244.15 billion in December 2017 from N181.91 million as at December 2016.
This compares with the 14.03 percent year on year growth in sales for recorded in 2013, 7.69 percent uptick in 2014,5.54 percent increase in 2015 sales and 20.15 percent year on year increase in sales in 2016.
The precipitous drop in operating performance in the years 2014, 2015 and 2016 was due to rising inflation, severe dollar shortages, currency devaluation as raging Islamists insurgency in north limited the company’s product distribution channel. A sharp drop in oil price combined with severe dollar shortages of mid 2014 hindered manufacturers from importing raw materials and equipment to meet production.
Firms had to buy currency at the inaccessible black market rate, which resulted in imported inflation as raw materials costs spiked.
The de facto devaluation of the currency in 2015 to N198/$ damped consumer spending hence undermining the revenue and margins of Nestle’ and its peers.
In 2016, the economy capitulated to the vagaries of macroeconomic shocks and tumbled into its first recession in 25 years while inflation rate were at all-time high of 17.21 percent in the month of October.
However, the gross domestic product of Africa’s largest oil producer expanded for three straight quarters last year after a 1.6 percent contraction in 2016, with year-on-year growth reaching 1.9 percent in the final three months of 2017.
An increase in crude prices and the introduction of a new foreign-exchange system that ended a crippling shortage of dollars helped attract more investment flows into the country, while paving the way for consumer goods firms to have access to dollars.
The above economic recovery showed face in the numbers of Nestle as net margins, a measure of efficiency, surged by 2300 basis point to 22.98 percent in December 2017 from 4.35 percent as at December 2016, the strongest growth in 5 years since BusinessDay started gathering data.
Nestle’s closed at N1400 as of Friday’s trading session on the Nigerian Stock Exchange, valuing it at N1.11 trillion, the stock is down 10.06 percent.
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