Nestle Nigeria Reports Impressive 2017FY Results

Proshare

Monday, March 05, 2018/ 03.15 PM / Cordros Capital 

•Revenue of NGN244.2bn reported was 34% higher vs. 2016FY, but slightly below consensus NGN245.9bn
 

•EBITDA of NGN62.18bn was 41% higher vs. 2016FY, and well-above consensus NGN58.5bn
 

•Finance charges dropped by 27.6% to NGN15.1bn
 

•PAT was NGN33.7bn, 326% higher vs. 2016FY, and above consensus NGN29.9bn
 


•Compared to our estimates, revenue and EBITDA trailed by 4% and 7% respectively while PAT beat by 9%
 

•Final dividend of NGN27.5 was declared, equating to NGN42.5 for the year (vs. our estimate of NGN38.2) and 3% yield on last closing price
 

•For Q4-17, though revenue was higher by 12.4% y/y, it declined 7% q/q, suggesting possible lower sales volume. Compared to our estimate, sales revenue was down 14%
 

•Gross margin in Q4-17 was 42.4%, -219 bps y/y and -107 bps q/q, and in line with our estimate
 

•Opex grew 17% y/y and 11% q/q. The reported 21% ratio to sales is consistent with our estimate, and is greater than the 20% reported in Q4-16 and 9M-17 average of 17.7%
 

•EBIT margin of 21% was lower 309 bps y/y and 447 bps q/q
 

•The surprising declines in finance income (-102% y/y and 104% q/q) and finance charges (120% y/y and 97% q/q) are noteworthy. Net forex loss in Q4 was NGN20 million – the lowest recorded during the year
 

•While PBT fell 23% y/y (+23% q/q), PAT grew 44% y/y (67% q/q) on significantly lower effective tax rate of 13% (vs. 54% in Q4-16 and 36% in Q3-17)
 

Overall, NESTLE’s 2017FY result is impressive. We note however, the lower-than-expected sales in Q4 as a negative surprise. Our estimates are under review
 

Ratios

31-Dec-17

31-Dec-16

Q4-2017

Q3-2017

Q4-2016

Gross margin

41.31%

41.41%

42.42%

43.49%

44.6%

OPEX margin

18.50%

20.40%

21.01%

17.61%

20.1%

EBIT margin

22.81%

21.01%

21.41%

25.88%

24.5%

PBT margin

19.18%

11.85%

20.96%

15.82%

30.6%

PAT margin

13.81%

4.36%

18.24%

10.16%

14.2%

Cost of sales margin

58.69%

58.59%

57.58%

56.51%

55.4%

Interest cover

3.69x

1.83x

56.90x

2.2x

-11.5x

Tax rate

27.98%

63.22%

13.00%

35.81%

53.6%

RoAE

89.03%

23.01%

RoAA

21.32%

5.49%

EPS (N)

42.55

10.00

PE

32.91x

57.01x

BVPS(N)

56.62

38.96

PBV

24.73x

14.63x

Interim dividend

15.00

0.00

Final dividend

27.50

10.00

Dividend yield (final)

1.96%

1.75%

Dividend yield (total)

3.04%

1.75%


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