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NESTLE NIGERIA PLC Q1'22 Earnings Release - Earnings accelerate amid mixed margin bag

Although Nestle Nigeria has recorded positive growth momentum in the past year, it has not been precluded from the wave of improvements seen so far in the FMCG space in the quarter. For the Q1’22 period, the company reported ₦110.2 billion in Revenue (Vetiva: ₦103.9 billion), a 26% rise from the previous year. The growth in topline was championed by both the Food and beverage segments, which accelerated 26% y/y each in the quarter. As stated in our FY’21 report, we see strong volumes (especially in the beverage segment) as well as higher pricing levels, supporting growth.

However, unlike most of its FMCG counterparts, Nestle’s gross margin has underperformed the previous year’s comparable by 1ppt, printing at 39% and was hampered by a faster rise in cost of sales (+28% y/y) to ₦67.0 billion. Conversely, with a relatively slower rise in Nestle’s operating expenses, the company’s EBIT strengthened by 30% y/y to ₦26.4 billion, with EBIT margin inching up by a moderate 1ppt.

For the rest of the year, we expect Revenue to remain stable at current levels, hinged on the increased volume and pricing seen in this quarter. Meanwhile, we expect margins to hover around 39% for the year, barring further price increases later in the year. Accordingly, we estimate a PAT figure of ₦56.4 billion, and estimate a one-year target price of ₦1,858.20.