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NESTLE NIGERIA PLC FY'21 Earnings Release - Solid food and beverage performance maintains topline

Dividend payout lowered amid earnings increment

For the FY’21 period, Nestle Nigeria PLC reported a revenue figure of ₦351.8 billion (Vetiva: ₦357 billion), 23% higher y/y. PAT also improved slightly by 2.1% to ₦40 billion, although underperforming our ₦46.1 billion estimate. Subject to approval, the board has recommended a final dividend of ₦25.50 (dividend yield: 1.8%), taking total dividend for FY’21 to ₦50.50 (FY’20: ₦65.50). Although this dividend is lower than the previous year’s comparable, the company has decided to limit payout to its earnings for the current year, paying out 100% of its earnings this year.

 

Solid growth across portfolio rides on market leadership

Whilst the topline figure was ₦5.1 billion below our estimate, we note that the underlying growth drivers have strengthened considerably over the last year. For the food segment, while growth has averaged 3.8% in the last 3 years and even turned negative in 2020, Food revenue has regained momentum, improving 21% y/y in 2021. We believe that the growth in Food was driven by the increased demand for Food and stronger pricing. The beverage segment has however returned a more solid growth in the same period. Given that growth has averaged 9% in the previous 3 years, the 24% growth in the FY’21 period is quite impressive. Nestle’s market leadership in the Nigerian coffee market is a strong growth driver for the beverage segment. Additionally, the resurgence in income from revived economic activities provides a strong growth case for its food segment. Combined with increased unit prices in both segments, we see another firm growth year for Revenue in FY’22.