The challenging operating environment in Nigeria’s slowly recovering economy was telling on Nestle after the FMCG giant’s profit growth slowed to 6.22 percent in 2019.
Profit rose to N45.68bn in 2019 compared to N43bn, the company said in its audited annual report published on the Nigerians Stock Exchange (NSE) March 1.
The slowdown in profit comes after-sales for the year grew 6.67 percent to N284.04bn. The food and beverage maker had grown Pre-and-post tax profit by 36.3 percent and 22.3 percent respectively in the first half of the year.
Despite the slowdown in growth, Nestle beat United Capital analysts’ forecasted sales growth of 5.0 percent growth in 2019.
Nestle’s beverage segment grew by 10 percent to N107.95bn while food segment grew 4.71 percent to N176bn.
The consumer goods giant noted a slowdown in its cost of sale as it continued to benefit from local sourcing most of its raw materials.
Cost of sales grew 2.32 percent compared to 6.33 percent in 2018 and a 5-year average of 14.46 percent.
As a result, Nestle last year was able to retain N45.12 from every N100 sales as gross margin compared to N42.78 in 2018.
Operating income for Nestle grew almost 19 percent to N72bn as the company showed efficiency in keeping its selling, general and administrative expenses below the inflation trend.
Net finance cost rose in the year due to a sharper drop in finance income than in finance cost.
Consequently, profit before tax rose 19 percent to N71.12bn in 2019 compared to N59.75bnin 2018.
Nestle’s performance shows no let-up in the battle for consumers between listed and unlisted FMCGs brands as the Nigerian economy continues on a path of slow recovery.
The consumer goods sector, represented by Food, Beverage and Tobacco Industry in the GDP report, grew by 2.17 percent in 2019, representing a slowdown of 0.8 percentage point from 2018.
Woes of FMCG firms are directly linked to the performance of the economy especially the growth in household income which in Nigeria has remained subdued with population growing faster than the economy.
Problems around the country’s infrastructures, low purchasing power and high inflation mean firms have to balance cost and pricing to remain attractive to consumers and profitable at the same time.
Despite the harsh operating environment, Nestle grew Earnings Per Share (EPS) by 6.21 percent to N57.63 while the company proposed a final dividend of N45 per share.
Nestle Nigeria manufactures, markets and distributes food products including Milo Ready-To-Drink, Maggi Seasoning, Nescafe, Golden Morn among others.
It also manufactures Hydrolysed plant protein mix and other food products based on its local agricultural raw materials under its backyard integration program.
The company recently appointed Juliet Ehimuan, the current country manager for Google in Nigeria, as an Independent Non-Executive Director of the Company.
The appointment took effect February 24, 2020 the company said in a note to the Nigerian Stock Exchange (NSE).
