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Nestle defies challenges, hit highest half-year profit in six years

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Nestle defied operating difficulties in the economy so far this year to register its highest half-year profits in six years, BusinessDay’s analysis showed.

Nestle’s revenue surged 30 percent to N222.4 billion, the highest in six years from N171.4 billion in the half year of 2021.

The cost of sales climbed to N142.2 billion in the half year of 2022, a 35 percent increase from N105 billion in the corresponding period of last year.

“Despite the company’s ability to source 80 percent of its raw materials locally, the cost of sales (adjusted for depreciation) bowed to global inflation and local FX pressures as it grew faster than Revenue,” analysts at CSL Stockbrokers Limited said in a note.

Nestle’s gross profit was up by 21 percent to N80.2 billion from N66.4 billion in the half year 2021.

“Consequently, gross margin shrank to 37.5 percent in H1 2022 from 40.4 percent in H1 2021. This wasn’t surprising, given the prevailing global supply chain disruption coupled with the Nigerian FX illiquidity situation,” a CSL report noted.

Revenue obtained from the sale of goods in Nigeria contributed the highest to the total revenue amounting to N220 billion while exports accounted for N2.3 billion.

Nestle recorded a profit of N28 billion, a 27 percent increase from N22 billion in the half year of 2021.

The food & beverage company saw its marketing and distribution expenses jump 24 percent to N28.3 billion from N23.5 billion in the comparable period.

However, Nestle was able to cut down its administrative expenses by 15 percent to N5.6 billion from N6.6 billion in the half year of 2021.

Finance income grew to N4.5 billion, a huge 912 percent increase from N444.6 million in the period under review.

The company’s finance income was driven by net foreign exchange gain which amounted to N2.9 billion while its interest income on bank deposits contributed N1.6 billion.

Nestle recorded finance costs at N7 billion in the half year of 2022, a massive 191 percent increase from N2.4 billion in the half year of 2021.

Read also: IBPLC declares gross profit of N46.3bn for 2021

In June 2022, total assets grew by 12 percent to N347 billion from N310 billion in December 2021.

Total equity rose to N29 billion, a 35 percent increase from N21.4 billion in December 2021.

Trade and other payables climbed 15 percent to N170.8 billion from N148.4 billion in December 2021.

Nestle’s cash flows from operating activities rose to N54 billion in June 2022, 24 percent from N43.4 billion in June 2021.

Cash generated from operating activities dropped 87 percent to N9.5 billion from N74.4 billion in June 2021.

Nestle’s net cash inflow from operating activities recorded a negative N12.2 billion in June 2022 from a positive N50.7 billion in the period under review.

Net cash used in investing activities recorded N3.2 billion, 88 percent increase from N1.7 billion in June 2021.

Nestle spent N17.2 billion on welfare and other personnel expenses in the half year of 2022, 7.5 percent from N16 billion.

Total income tax expense increased by 38 percent to N16 billion from N11.6 billion in the period under review.

Earnings per share rose to N35.01 from N27.42 in the period under review.