Nestlé raises stake in Nigerian unit by N3.63bn amid optimism for rebound
Nestlé S.A., the majority shareholder in Nestlé Nigeria Plc has increased its stake in the Nigerian unit through equities purchases valued in excess of N3.633billion.
Nestlé S.A. is a Swiss multinational food and drink processing conglomerate corporation headquartered in Vevey, Vaud, Switzerland. It is the largest food company in the world, measured by revenue and other metrics.
Details of the equities deals consummated at the Nigerian Stock Exchange (NSE) show that between March 2 and 3, 2021 Nestlé S.A. bought 2.166million units of Nestlé Nigeria Plc shares at an average price of N1, 349 per share.
On March 2, 2021 Nestlé S.A purchased 1.980 million units of Nestlé Nigeria Plc worth N2.671billion at N1, 348.84 per share, while on March 3, 2021 it bought 186.277 units valued N251.425million at N1, 349.74 per share.
Also, between March 4 and 5, 2021, Nestlé S.A purchased 77,019 units of Nestlé Nigeria Plc shares at an average price of N1, 349 per share.
On March 4, Nestlé S.A. bought 50,000 units of Nestlé Nigeria Plc value at N675million at N1, 350 per share while on March 5; it purchased 27,019 units valued at N36.449million at N1, 349.03 per share.
Nestlé Nigeria Plc recently announced its audited financial results for the year ended December 31, 2020. The company reported revenue of N 287.1 billion in 2020, up by 1.1percent over 2019 low of N284.035billion.
Gross profit for the year 2020 stood at N119.2 billion, down by 7 percent when compared to N 128.1billion recorded in the preceding year. Operating profit of N64.419billion in 2020 against N72.062billion in 2019 represents a decline of 10.6percent.
The company’s finance cost of N4.427billion in 2020 as against N2.267billion in 2019 which represents an increase of 95.3percent impacted negatively on its profit level.
Nestlé Nigeria Plc posted pre-tax profit (PBT) of N60.638billion in 2020 as against N71.124billion in 2019, which represents a decline of 14.7percent. Profit after tax (PAT) of N39.3billion in 2020 as against N45.683billion in 2019, was down by 14.2percent.
The N1, 350 which Nestlé Nigeria shares were priced at the close of trading week ended Friday March 5 represents a decline of 10.3percent this year.
Nestlé Nigeria Plc shares trade at a discount compared to target price (TP) of N1, 511.16 which Lagos-based analysts at Vetiva Research set for the stock in their March 5 note to investors.
Despite underperforming the analysts’ forecasts, Vetiva believes that Nestlé Nigeria Plc fundamentals remain strong given its product portfolio.
Thus, the analysts remain cautiously optimistic as they forecast revenue of N296.3billion for Nestlé Nigeria Plc in full year 2021 – a 3.2percent year-on-year (y/y) expansion.
“We base our forecasts on the premise that Nestle’s products remain household names and brand leaders in their respective market segments, despite increasing competition” Vetiva added.
In their recently released full year scorecards, Wassim Elhusseini, Managing Director and CEO of Nestlé Nigeria Plc said, “Amidst a very challenging business environment in 2020, we strengthened market leadership across our categories. Thanks to our high performing team, we successfully continued to provide our consumers with high-quality affordable foods and beverages to enjoy every day.”
“In line with our purpose of unlocking the power of food to enhance quality of life for everyone today and for generations to come, we broadened our portfolio in 2020 to help our consumers fulfill their nutrition needs. Our latest innovation is the new GOLDEN MORN Multi-Cereal, fortified with Iron and other vitamins and minerals.”
In addition to N25 per share interim dividend already paid in December 2020, the Board proposed final dividend of N 35.5 per share making for a total dividend of N60.5 for 2020.
This proposed dividend will be submitted for approval by shareholders at the company’s Annual General Meeting on June 22, 2021. Qualification date for the dividend is May 21, 2021 while the closure of members’ register is May 24-28, 2021 (both dates inclusive).
“Going into 2021 – which portends to be another challenging year – we will continue to focus on keeping our people safe, continued supply of high-quality nutritious foods and beverages to consumers as well as caring for our communities and the planet. We will also keep supporting our business partners as we strengthen our operations to adapt to the rapidly changing reality,” Elhusseini said.
“We remain optimistic on the prospects that the AfCFTA could provide; Nestlé currently lists over five African countries as export destinations, however, it only earns revenue from about 3 such destinations. With the trade agreement, we believe that this would improve significantly. Regarding costs, we expect to see further increases, in line with our inflation expectation for the year (18.53percent average for 2021)”, Vetiva further stated.