Is Nestle Nigeria Getting Squeezed?

Last week, Nestle Nigeria Plc released its 9M 2020 results. Revenue went up by marginally, but there was a dip in the bottom line.

Revenue rose by 1% from N211.3 billion in 2019 to N212.7 billion in 2020. Profit after tax declined by 13% from N36.8 billion in 2019 to N31.9 billion in 2020.

Where Is the Softness?

Nestle Nigeria’s revenue can be viewed from two angles. By segments and by country of revenue.

The Food Segment Is Lagging

Nestle has 2 segments. Food and Beverage.

Food includes the production and sale of Maggi, Cerelac, Nan, Lactogen, and Golden Morn.

Beverages include the production and sale of Milo, Chocomilo, Nescafe, Milo ready-to-drink (RTD), and Nestlé Pure Life

Both segments had a decline in profit, the food segment had a decline in revenue and a much steeper decline in profit. Revenue declined by 6.3% from N131.8 billion in 2019 to N123.3 billion in 2020. Profit before tax declined by 18.6% from N 37.3 billion in 2019 to N30.6 billion in 2020.

The drop in food revenue could be either due to lower sales (which is surprising in a pandemic) or more pressure from competitors. It’s likely the latter.

Export Revenue Is Growing Strongly

The company also splits its revenue between domestic sales and exports. Domestic revenue rose marginally by 0.3% from N207.8 billion in 2019 to N208.7 billion in 2020. Export revenue grew at a faster pace. It rose by 16% from N3.4 billion in 2019 to N4 billion in 2020.

Something to Cheer

Despite the lower profit, the company has proposed N35.6 billion in dividends to shareholders.

In granular terms, this amounts to an interim dividend of N25 per share.

Nestle earned N40.29 per share between January to September 2020.

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