Nestlé continued to face pressure from harsh macroeconomic conditions and a growing debt profile in 2024, raising concerns about the company’s ability to meet its debt obligations. However, we believe that corporate actions may be underway to steer the business away from the brink of financial distress. While our concerns regarding Nestlé’s debt burden remain valid, we anticipate a gradual recovery in earnings as macroeconomic conditions begin to stabilize in 2025.
Unilever Nigeria Plc turned the tide in 2024, posting a profit after shutting down its loss making Home Care segment. A surge in revenue reflected strong demand across product lines, while a revaluation gain and restructuring writeback provided much needed relief. Despite rising inflation, naira devaluation, and surging operating expenses, the company’s strategic cost-cutting efforts helped it return to profitability.
Earnings surprise on gross margin volatility "In its unaudited FY’22 financial statements, Unilever Nigeria PLC reversed the weak earnings reported in the 9M period (a loss of ₦0.3 billion). Bottom-line improved 4x to ₦5.9 billion in FY’22, bucking our expectation of suppressed profitability. Although Q4 topline printed at ₦23.9 billion, in line with our projection of ₦23.4 billion, the company contradicted our Q4 profit estimate, reporting PAT of ₦6.4 billion (Vetiva: ₦0.7 billion), the...
Driven by 30% and 24% y/y increases in its Food and Beverage segments respectively, Nestle Nigeria PLC’s 9M earnings showed a 27% rise in Revenue to ₦333.5 billion (Vetiva: ₦331.4 billion), with bottom line printing at ₦40.2 billion (+20% y/y). The company has declared an interim dividend of ₦25.00 per share (9M’21: ₦25.50), which translates to a dividend yield of 2% at current market valuation. However, despite the sturdy pricing maintained, gross margin declined by 4ppts y/y, worse...
In its Q1’22 earnings release, Unilever Nigeria reported a 6% y/y upswing in Revenue to ₦20.6 billion, driven by growth in both the Food (+26% y/y) and Home & Personal Care (+23% y/y) businesses. We recall our expectation that the disposal of the tea business would lead to a decline in Revenues, at least for a few quarters, with a subsequent normalization in volumes. Accordingly, the performance of the food segment (which has been restated to reflect this sale), came in line with our proje...
Full Article at IIR has reaffirmed its Recommended rating for PIA after undertaking a review post the appointment of a new Portfolio Manager, Harding Loevner. The full report can be found on the IIR website. On 26 July 2021, Pengana International Equities Limited (PIA) announced a fully franked dividend of 1.35 cents per share for the June quarter. This represents an 8% increase on the March quarter dividend and takes the total dividends declared for FY21 of 5.1 cents per share, fully franked....
We resume coverage of Nestlé Nigeria Plc – Nigeria’s leading fast-moving consumer goods (FMCG) company – with a target price of NGN1,404 (previously NGN1,460) and a Hold recommendation. Nestlé’s broad product portfolio across the food and beverage segments continues to underpin the company’s appeal to investors, which supports the NGN1tn market cap. This makes it the most valuable FMCG company and the fifth-largest company on the Nigeria stock exchange. In addition, Nestle’s policy of returni...
A feeling of deja vu If Nestle’s topline performance in Q420 had you feeling like you had seen this story before, it’s probably because you have! Revenue grew on a YoY basis for the second consecutive quarter, this time by 2.3% to N74.35 billion. But, just like Q320, costs grew faster than revenue at a rate of 10.6%YoY which led gross profit down by 8.3%YoY to N29.19 billion. Also similar to Q320 was a fall in OPEX (-9.8%YoY) which was not enough to stop EBIT from declining (-6.7%YoY to N14.2...
Nestle Nigeria recently released its half year results, reporting a flat topline performance in Q2’20 versus Q2’19, albeit 0.6% higher than our estimate. Revenue came in at ₦70.3 billion in the quarter, taking H1’20 Revenue to ₦141.0 billion, also flat compared to the previous year. While food revenue continued to underperform this year (-2.5% y/y to ₦86.0 billion in H1’20), the revenue growth in beverages (+2.5% y/y to ₦55.0 billion) acted as a buffer, likely boosted by Ramadan demand i...
In the summer of 2015, I met Prof. Ed Altman at a lecture in New York. He devised the Altman Z-score in 1968 and first published his formula 50 years ago, after doggedly sifting through thousands of pages of annual reports to obtain the data for his analysis. The Altman Z-score became the gold standard for bankruptcy analysis. The Altman Z-score is a formula for determining whether a company is headed for bankruptcy. It takes into account profitability, leverage, liquidity, solvency, and acti...
On Saturday, the Organization of the Petroleum Exporting Countries (OPEC) and Russia agreed to extend 10% oil output cuts until the end of July. This amounts to an ongoing cut of 9.7mn barrels a day. Oil prices have continued their recovery after the deal was announced, but the output cuts will also add fuel to the fledging food price boom, putting upward pressure on food prices at a time of intense dislocation of food supply. The implications of the recovery in oil prices for the food indust...
The sleepy IPO market just received an espresso shot. Amidst the doom and gloom, JDE Peet's raised US$2.5bn last week, in Europe's biggest IPO since 2018. It was also the first major listing that was conducted entirely in the brave new world of Zoom calls. The deal is extraordinary in that Covid-19 did not dent its prospects. On the contrary, the issuers actually rushed the deal forward to benefit from the post-March stock market rally. The IPO process was reduced from four weeks to 10 days d...
When the history of Covid-19 is written, it may be recorded as the Zoom era. The videoconference provider has spread as rapidly as the virus. It’s users have risen 30 fold from just 10 million in December 2019 to almost 300 million in April 2020. Like Google and Xerox, Zoom is a now used as verb. [-eu-west-1.amazonaws.com/exotix-content-uploads/jlKmZltrPwcxUPXecrBTnY2SQyGGyhy1WJBMI30I.png] Investors are clamouring for exposure to Zoom and its videoconferencing peers, such as Cisco W...
Covid-19 has devastated the lives of Africa's poor. In many countries, the lockdowns have halted the income of day labourers, andcurbed their spending. Working primarily in construction, transport and hospitality, they are an engine of consumption, and as some countries begin to ease lockdowns, the pivotal role that the African poor pays in consumption growth will again be apparent. HOW CAN AFRICAN COMPANIES BETTER TARGET THE POOR? Companies can successfully target the poor by selling product...
Marc Rich, the infamous commodity trader, amassed a fortune despite facing extradition charges. He spent much of his life in exile in Switzerland, after the US authorities charged him with racketeering and tax evasion. Rich started a commodity trader that now forms the basis of Glencore. But even Marc Rich never faced a calamity as devastating as the crisis brought on by Covid-19. The streets are now littered with bust commodity traders. Last month, Hin Leong, a Singaporean marine fuel trader...
As families gather for Easter celebrations, the food on the table is a lot pricier than at the time of New Year festivities. Though oil prices have fallen 53% in 2020, Covid-19 has had the opposite effect onfood prices. Staples such as wheat and rice have rallied. Rice prices are now at a seven-year high. Pork, which is a vital source of protein in China, has risen 16% ytd. Oil vs food prices ytd [-eu-west-1.amazonaws.com/exotix-content-uploads/Px5m7wCNJyxNwa8nwCMk2AQlSKEhabbuy7165e...
President Muhammadu Buhari declared a shutdown of business, economic and social activities in Lagos, the Federal Capital Territory (FCT) and Ogun during his national broadcast on Sunday. The restriction aimed at curbing the spread of the coronavirus in these states, which account for 83% of all 111 confirmed cases in the country (according to the NCDC), is expected to last 14 days and will take effect from today at 11 pm. Essential services like hospitals (including clinics and pharmacies), a...
While performance from Foods disappointed, Nestlé Nigeria's Q3 '19 results highlight the continued tenacity of its Beverages segment (+7% revenue growth y/y). Despite Nestlé locally sourcing between 80% to 90% of its inputs, we believe the border closures surrounding Nigeria negatively impacted the producer's GP margins which declined from 47% in Q2 '19 to 44% in Q3 '19. We view the current economic pressure that lower LSM Nigerians are experiencing as a leading cause of the slower growth in...
Sector valuation is now closer to fair value. Our coverage of Nigerian consumers stocks is down 21% ytd on aggregate, and currently trades at a median FY 20f PE and EV/EBITDA of 22.8x and 10.3x, respectively (average 30% discount to the 2-year historical median). In our view, the sector historically traded at unjustifiably rich multiples, and is now closer to our fair value estimates (FY 19f PE and EV/EBITDA of 23.9x and 7.9x), hence our broadly neutral stance, despite cuts to our target prices....
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