NESTLE | Nestle Nigeria 9M 2023 Earnings Review : High finance cost leads to Pre-Tax loss

In its 9M 2023 earnings result, Nestle’s Revenue grew by 18.93% y/y to N396.59bn from N333.47bn in 9M 2022. The food segment grew by 27.0% y/y to N254.38bn in 9M 2023 from N200.26bn in 9M 2022 and contributed the most to the company’s revenue by (64.1%). The company’s beverage segment (Milo, Nescafe, Nido and others) also grew by 6.8% y/y to N142.21bn in 9M 2023 from N133.22bn in 9M 2022. We forecast Revenue growth of 13% and 14% y/y from its Food and Beverage segments and project FY 2023 Revenue growth of 13% y/y to N506.65bn.

The company’s high Net Finance Cost of N148.24bn however impeded bottom lin e growth resulting in a Net Loss of N43.07bn in 9M 2023 compared with profit of N40.15bn in 9M 2022. We do not expect as steep a devaluation of the currency as seen in FY 2023, so we forecast lower finance cost ahead. We estimate the company will return to profitability in FY 2024 with Net Profit of N51.91bn.

We have revised our target price up to N1,834.56/s from N1,414,70/s and we retain a Buy recommendation. We arrive at our target price using the discounted cash flow (DCF) and relative valuation methodologies in a ratio of 60:40


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