- Nestle reported a 6% yoy increase in FY 19 PAT to NGN45.7bn, but this was 12% lower than our expectation
- Management announced a final dividend of NGN45.00 per share
- We maintain our Buy recommendation on Nestle with a TP of NGN1,460, suggesting an ETR of 34%
Nestle Nigeria reported a 6% yoy increase in FY 19 net income to NGN45.7bn, but 12% lower than our expectation due to a weaker gross profit margin and higher effective tax rate. Nonetheless, the company’s net income growth was driven by the 7% yoy uptick in revenues and a 200bps yoy expansion in gross profit margin to 45%.
Management announced a final dividend of NGN45.00 per share, against our NGN30.5 per share forecast, representing a dividend yield of 4%.
We maintain our Buy recommendation on Nestle with a TP of NGN1,460, suggesting an ETR of 34%. Despite the weak macroeconomic environment, we are optimistic on Nestle’s medium-term performance due to: 1) the strength of the brand and strong distribution network; and 2) the company's efficiency in managing operating cost pressures.
Key positives
- Revenue up 7% yoy, in line with expectation
- Gross profit margin expansion to 45% in FY 19, compared with 43% in FY 18
- Net income increased by 6% yoy
Key negatives
- Higher effective tax rate of
- Opex to sales ratio of 20% in FY 19, against 16% in FY 18.
| NGNmn | FY 19 | FY 18 | yoy |
|---|---|---|---|
Revenue | 284,035 | 266,275 | 7% |
Cost of goods | 155,888 | 152,354 | 2% |
Gross profit | 128,147 | 113,920 | 12% |
Opex | 56,083 | 53,289 | 5% |
EBIT | 72,062 | 60,641 | 19% |
Net finance cost | 938 | 890 | 5% |
Net income | 45,683 | 43,008 | 6% |
EPS | 57.63 | 54.26 | 6% |
Total assets | 193,374 | 162,334 | 19% |
Total liabilities | 147,817 | 112,114 | 32% |
Total equity | 45,558 | 50,220 | -9% |