Nestle Nigeria Plc recently published its Q4 2017 results, which cross section of analysts said was reflective of the fading impact of price hikes taken in H2 2016.
The result showed that Nestlé’s topline growth was missed, as it was down by -6.97 per cent q/q; and grew by 12.36 per cent y/y.
According to Codros capital in it report on the company’s result, the firm’s topline growth in Q4 2017 was the weakest in 2017, which may not be unconnected with the fading impact of the price hike effected in 2016
The published Q4 2017 results showed a -23.03 per cent y/y decline in PBT to N12.35bn, largely driven by +108% increase in finance cost and -220bps contraction in gross profit margin, which more than offset the +12.36% y/y increase in revenue.
While the company’s opex/sales ratio (21% in Q4 2017) remained relatively flat y/y, which may not be unconnected to the operational efficiencies and structural cost savings highlighted
The investment analyst noted: “in the parent company’s FY 2017 conference call, we note that the FX loss of -N263m in Q4 2017 also accounted for the -964bps y/y reduction in PBT margin in Q4 2017 when compared to the FX gain of N3.14bn in Q4 2016 which led to a positive net finance cost of N3.2bn in Q4 2016”.
On a sequential basis, PBT grew by +23.26% q/q, majorly driven by a -95.86% q/q reduction in net finance cost which more than outweighed the -6.97% q/q slowdown in topline and higher opex/sales ratio (21.0% in Q4 2017 compared to 17.6% in Q3 2017).
The decline in net finance cost may not be unconnected with the c.-30% q/q decrease in total loans and borrowing to cN20bn.
The FY 2017 performance, showed that Nestlé’s PBT grew by +117% y/y to N46.83bn majorly driven by +34.21% y/y increase in topline to N244bn, -190bps y/y contraction in opex/sales ratio to 18.5% as well as a -46.78% y/y reduction in net finance expense.
‘We believe the topline line growth was largely due to price increase, while the reduction in net interest expense was on the back of the -59% y/y reduction in total loan and borrowing, noted the investment expert.
Stories by Bonny Amadi