Nestle Nigeria, in its first quarter unaudited results recorded a 10 percent drop in profit after tax to N16.21 billion on the back of rising operating costs and finance costs during the period.
The firm’s finance cost grew 125 percent year-on-year while operating cost recorded 36.6 percent growth during the period.
The consumer goods firm’s finance cost increased to N5.34 billion in the first three months of 2023 from N2.37 billion in the same period of last year while operating expenses rose to N23 billion from N16.84 billion.
The operating expenses grew on the back of 39.7 percent increase in administrative expenses and 36 percent growth in marketing and distribution expenses during the period.
Nestle Nigeria’s administrative expenses grew to N3.66 billion in the first three months of 2023, a 39.7 percent increase from N2.62 billion in the same period of 2022.
Marketing and distribution expenses increased to N19.34 billion, 36 percent increase from N14.22 billion in the comparable period.
Nestle Nigeria’s revenue however recorded 16 percent growth to N127.97 billion in the first three months of 2023 from N110.23 billion in the same period of the previous year.
Revenue obtained from Nigeria amounted to N127.71 billion, up 18 percent from N108.2 billion in the comparable periods while revenue from export dropped to N256.61 million from N2.03 billion.
The food segment contributed 63.4 percent to the total revenue of N127.97 billion and recorded a 20.5 percent increase year on year.
The beverage segment contributed 36.6 percent to the total revenue of N127.97 billion in the first three months of 2023, and recorded 6.1 percent growth during the period.
“Despite the company’s ability to source 80 percent of its raw materials locally, the cost of sales (adjusted for depreciation) yielded to inflation and local FX pressures as it grew in line with revenue, up 16.1 percent y/y to N74.41 billion (Q1 2023) from N65.42 billion (Q1 2022),” Goke Adetoyinbo, analyst at CSL Research said in a note.
The cost of sales increased to N76.32 billion in the first three months of 2022, up 14 percent from N66.98 billion in the similar period of the previous year.
Analysts at CSL Research noted that the management continued its product innovations and campaigns having introduced Nescafe Malty, a blend of Nescafe 3-in-1 and malt in 2022.
“Consequently, the EBITDA margin moderated by 1.5ppts to 24.5 percent (Q1 2023) from 26 percent (Q1 2022).”
Depreciation and Amortisation increased by 21.5 percent year on year to N2.72 billion in the first quarter of 2023 from N2.24 billion in the first quarter of Q1 2022.
“In the absence of Other Income, Earnings Before Interest and Tax (EBIT) grew by 8.5 percent year on year to N28.65 billion (Q1 2023) from N26.40 billion (Q1 2022).” CSL Research said in a note.