INVESTOR’S DASHBOARD Nestle Nigeria: Battling downturn in business
INestle Nigeria Plc is part of the Nestle group, nutrition, health and wellness company renowned worldwide for high quality products. The company began simple trading operations in Nigeria in 1961 and has today grown into a leading food manufacturing and marketing company.
Nestle Nigeria was listed on the floor of Nigerian Stock Exchange on April 20, 1979.
Nestle S. A. of Switzerland and Nestle CWA limited, Ghana are major shareholders of the company. As at December 2009, the number of Nigerian shareholders was more than 31,000.
Nestle has a nine man board headed by Mr. David Ifezulike. Mr. Dharnesh Gordhon is the Managing Director of the company. Mrs. Ndidi Nwuneli is independent non-executive director, Mr. Kais Marzouki is non-executive director, Mr. Syed Saful Islam is an executive director, Mr. Giuseppe Bonanno is non-executive director, Mrs. Iquo Ukoh is the marketing service director, Mr. Gbenga Oyebola a non-executive director and Mr. Bode Ayeku who is the company secretary.
The share capital of Nestle Nigeria Plc stood at 792.656 million ordinary shares of 50 kobo each worth N396.328 million in 2014 financial year.
Its retained earnings declined from N40.139 billion in 2013 depreciating by N4.673 billion or 11.64 per cent to N35.466 billion in 2014. Nestle Nigeria retained earnings have been appreciating year on year in the last five year s aside from 2014 which it recorded 12 per cent decrease. It retained N22.704 billion in 2011 year end rose to N33.707 billion in 2012 and N40.139 billion in 2013.
Shareholder’s fund of the company was N40.594 billion in 2013, went down to N35.939 billion at the end of the immediate past financial year as the value depreciated by N4.655 billion which was 11.47 per cent. Its shareholder’s fund dropped for the first time in the last five year as it improve from N23.209 billion in 2011, N34.185 billion in 2012 and N40.594 billion in 2013.
Fixed assets in 2013 was N66.451 billion, it grew by N2.221 billion or 3.34 per cent in 2014 to become N68.672 billion. Its current assets depreciated by N4.366 billion or 10.46 per cent in 2014. In 2013, it was N41.755 billion; it crashed to N37.389 billion in 2014. Total assets in 2013 was N108.207 billion which depreciated by N2.145 billion or some 1.98 per cent in 2014 to stand at N106.062 billion at the end of the year.
The revenue generated in 2014 appreciated by N10.244 billion representing an increase of 7.70 per cent. Its revenue has been on downward trend in the last three financial years in terms of percentage year on year, the difference in its revenue between 2011 and 2012 was 19.14 per cent dropped to 14.03 per cent in 2013 and stood at 7.70 per cent in 2014 financial year. It made revenue of N97.961 billion in 2011, N116.707 billion in 2012, N133.084 billion in 2013 and N143.328 billion in 2014.
In 2013, the company’s cost of sales was N76.298 billion which was 57.33 per cent of its revenue and in 2014 it spent 57.28 per cent of its revenue on cost of sales which amounted to N82.099 billion. Gross profit in 2013 was N56.785 billion which was 42.67 per cent of the revenue; it came to N61.229 billion in 2014 represented 42.77 per cent of its revenue.
The company’s gross profit appreciated by N4.444 billion or by 7.83 per cent in 2014. Finance costs in 2013 was N2.146 billion, it was N5.305 billion in 2014.
From profit before tax of N26.047 billion in 2013, the company made a drop of N1.601 billion in 2014 to stand at N24.445 billion. Despite that it paid lesser tax in 2014 it after tax profit of dropped from N22.258 billion in 2013 to N22.235 billion in 2014. It made 15.51 per cent of its revenue as profit for the year 2014 as against 16.72 per cent of revenue it made in 2013 financial year.
Current ratio in 2013 was 1.26:1, this mean that current assets of the company can take care of its current liabilities and still have quarter of its current assets value left. In 2014, the situation was changed to 0.84:1, which means its current assets cannot absorbe its current liabilities. The situation presented a decline if its inventory is taking out of the assets. In 2013, it came down to 0.96:1. Its current assets minus stock could only provide for or take care of 95.99 per cent of its liabilities. In 2014, it reduced to 0.59:1 which means its current assets minus stock could only take care of 59.22 per cent of its liabilities.
Analyst opinion: The company performance is declining as its earnings per share slightly drop from N28.08 kobo in 2013 to N28.05 kobo in the year under review.
As of December 31, 2014 when the company financial year ended, it will take investors who invested in Nestle Nigeria 35 years to recoup the investment because the company P/E ratio was 35.11.
Recently Nestle SA announced it is planning to cut down about 15 per cent of its workforce in 21 African countries which is not clear either Nigeria included or not. But available information shows that Nestle Nigeria employees reduce from 2,288 in 2013 to 2,245 in 2014.
For the company to remain strong in its business, it must look for way to strengthen its products and source for its raw materials locally in order to reduce its cost of sales.