Nestle Nigeria Q2 2018- Sales Up by 12% YoY to N67.8bn

Proshare

Friday, August 3, 2017 /4:40PM / NSE

Event: Nestle Nigeria (Nestle) reports better-than-expected Q2 2018 results

Implications: On an annualised basis, Nestle’s H1 PBT of N31.8bn is tracking well ahead of consensus 2018E PBT estimate of N58.2bn. Therefore, we expect upward adjustments to consensus estimates on average. Y/y, Nestle’s Q2 PBT of N18.2bn grew 79% y/y and 34% q/q respectively. The positive surprises on the gross margin line (as gross margin expanded by +305bps y/y to 44%) and a net finance income of N598m are commendable. We believe the market will react positively to these numbers.  

Positives: Q2 sales of N67.8bn were up 12% y/y, while PBT and PAT grew 79% y/y and 57% y/y respectively. As stated above, the gross margin expansion and net finance income helped. Unlike recent quarters, Nestle posted an fx-related income of N588m. Compared with our estimates, while Q2 sales were in line, PBT beat by 33%.

Negatives: No obvious negatives

We rate the stock Underperform. Our estimates are under review.

Nestle Nigeria Q2 2018 results: actual vs. FBNQuest Capital Research estimates (N millions)

Q2 2018

H1 2018

 

Actual

Y/y

Q/q

FBNQuest Capital est.

Act. vs      FBNQuest Capital est (%)

Actual

Y/y

FBNQuest Capital est.

Act. vs      FBNQuest Capital est (%)

 

Sales

67,832

11.6%

0.5%

66,845

1.5%

    135,296

11.0%

134,309

0.7%

 

cost of sales

-38,012

5.9%

-8.9%

-41,110

-7.5%

-79,718

8.3%

-82,816

-3.7%

 

Gross profit

29,820

20.0%

15.8%

25,735

15.9%

     55,578

15.0%

51,493

7.9%

 

-gross margin

44.0%

305bps

578bps

38.5%

546bps

41.1%

143bps

38.3%

274bps

 

Operating expenses

-12,186

7.2%

8.4%

-11,364

7.2%

-23,424

8.23%

-22,602

3.6%

 

Other operating income

0

n/a

n/a

0

n/a

0

n/a

0

n/a

 

Operating profit

17,634

30.7%

21.5%

14,372

22.7%

32,153

20.4%

28,891

11.3%

 

Net int. and similar chgs

598

n/a

n/a

-636

n/a

-281

-87%

-1,515

-81.5%

 

PBT

18,232

79.2%

33.7%

13,735

32.7%

31,873

30.3%

27,376

16.4%

 

-PBT margin

26.9%

1013bps

666bps

20.5%

633bps

23.6%

350bps

20.4%

317bps

 

Tax

-5,380

170.7%

6.9%

-3,846

39.9%

-10,415

31.6%

-8,880

17.3%

 

Tax rate

29.5%

998bps

-740bps

28.0%

151bps

32.7%

n/a

32.4%

n/a

 

PAT

12,852

56.9%

49.3%

9,890

30.0%

21,458

29.7%

18,495

16.0%

 

-PAT margin

18.9%

547bps

619bps

14.8%

415bps

15.9%

229bps

13.8%

209bps

 

 

 Source: NSE; FBNQuest Capital Estimates

 


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