Nestle still rides high on Nigerian food/beverage industry

Nestle Nigeria plc is the manufacturer of well-known brands ranging from baby foods, cereals, bottled water, chocolate, culinary and confectionery to diary, drinks, ice cream, and frozen food.

One of the oldest in the industry, the firm rides on popular brands like Cerelac, Milo, Maggi cube and Juicy Juice, among others, capturing a large share in the captive Nigerian fast-moving consumer goods (FMCG) market and beyond.

Recently, the firm released its financial statement to the Nigerian Stock Exchange (NSE), which shows an improvement from the result of 2012. The result shows an improvement in the performance of the company in the 2013 financial year ended December.

Sales or revenue of the firm in 2012 was N116.7 billion, but 2013 result shows it shot up to N133.1 billion, representing a 14 percent increase in revenue or turnover. Even though this may not satisfy some analysts’ projection, it still represents an impressive share of the market in a highly competitive and fragmented market, partly influenced by declining consumer spending power.

Cost of sales in 2012 was N66.5 billion but it rose to N76.3 billion in 2013, representing a 14.6 percent increase, overtaking the revenue percentage increase by 0.6 percent.

Gross profit rose to N56.8 billion in 2013, from N50.2 billion recorded in 2012, representing 13.2 percent.

One area that reported high increase is distribution, sales and marketing expenses, which recorded N23 billion in 2013, from N18.9 billion reported in the corresponding period of 2012.

Administrative expenses, on the other hand, increased by13.3 percent to N6 billion in 2013, from N5.3 billion in 2012. For the operating profit, there was 7.1 percent increase in 2013, rising to N27.8 billion, from approximately N26 billion recorded in 2012.

Investment income declined by 60.2 percent to N361.3 million in 2013, from N909.1 million recorded in the corresponding period of 2012.

Finance cost overshot percentage revenue, increasing by 16.1 percent to N2.1 billion in 2013, from N1.8 billion in 2012.

Pre-tax profit, on the other hand, increased by 3.95 percent in 2013 to N26 billion, from N25.1 billion recorded in 2012.

There was 3.2 percent reduction in taxation to N3.8 billion in 2013, from N3.91 billion reported in 2012. But profit after tax rose by 5.3 percent in 2013 to N22.3 billion, from N21.1 billion in 2012.

Under the leadership of Dharnesh Gordhon, CEO, who replaced Martin Woolnough in June 2013, Nestle Nigeria has recorded this big leap.

‘’One of the corporate strategies of Nestle is to purchase raw and packaging materials from local suppliers,’’ Gordhon said, while explaining one reason for the company’ long-term success.

Industry analysts also attribute the performance to popularity of brands, quality as well as good manufacturing infrastructure.