Market Intelligence

Nestle’s revenue is 8 times Cadbury’s


March 12, 2018 | 1:12 am
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Many analysts have reported Nestlé’s full year earnings but the story is that the consumer goods giant’s revenues are eight times more than peer rival, Cadbury.

In 2014, the revenue and net profit ratio of the two companies were just 1.28x and 1.36x respectively, according to analysts at Cordros Research, a leading research firm.
“Also, at the end of 2004, Nestlé’s share price of N99.75 was 1.4x Cadbury’s. The spread, today, is 82x,” said analysts at Cordros Research.

Investors are paying up for Nestle perhaps seeing the firm as a growth stock and better positioned to grow volumes (off a low base) given its value-focused portfolio.
Nestle currently sports a trailing twelve months (ttm) price to sales ratio of 4.48x on sales of N244.15 billion, compared to 1.10x for Cadbury.
Nestlé’s consistent earnings growth amid a tough and unpredictable macroeconomic environment is the reason investors value its stocks more than peer rival.

Nestle earnings have been growing steadily since 2004 albeit slight drop during the recessionary period brought on by lower oil price, currency devaluation and depressed consumer spending.
This compares to Cadbury’s unimpressive form in the last 6 year as the company recorded a loss in 2016.
Nestle has introduced more product than peer rival, with products between 18 and 36. This compared with Cadbury’s 5 and 18, according to analysts at Cordros Research.
Nestle has spent more money to finance its expansion plans more than most consumer goods firms in the country.
“Nestlé clearly stands out here. In the last ten years, the group has invested NGN104bn in capital expenditure. This equates to NGN10bn per annum, 5x Cadbury’s N2 billion averages per annum capex investment,” said analysts at Cordros Research.
Nestlé, as part of its commitment to meet the growing demand of its consumers in Nigeria, commissioned a N4.1 billion Milo Ready-To-Drink (RTD) beverage production plant in Agbara, Ogun State.

The N4.1 billion investment by Nestle is expected to create an additional job for both direct and indirect employment, while the new RTD plant is part of the existing Agbara factory, which has been operating for 37 years.

Nestle 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.




March 12, 2018 | 1:12 am
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