Slower sales, higher interest costs hinder Nestle Lanka 1Q

Nestle Lanka PLC, the local unit of the world’s largest food company, reported lower earnings for the quarter ended March 31, 2019 (1Q19) amid a sluggish economy and significant shift in consumer behaviour.

The company’s sales fell 7.7 percent year-on-year (YOY) to Rs.8.87 billion. The gross profit fell 15.2 percent YOY to Rs.2.92 billion, despite a 3.5 percent YOY decline in cost of sales.

The operating income for the quarter under review fell a sharp 27.4 percent YOY to Rs.914.9 million. The company incurred a net finance income of Rs.92.8 billion for the period under review, increasing from just Rs.18.6 million 12 months ago.

“Net financial expenses have increased mainly due to the borrowings for significant capital expenditure and cessation of capitalization of borrowing costs on the completion of key projects,” Nestle Lanka said.

The firm recently commissioned a Rs.5 billion coconut milk processing factory— Nestle Lanka’s single largest investment in Sri Lanka.the company has Rs.1.92 billion short-term debt and Rs.2 billion long-term debt.

The earnings for the quarter accordingly fell 39.3 percent YOY to Rs.572.9 million. The earnings per share deteriorated to Rs.10.66 from Rs.17.52. Nestle S.A owns 90.82 percent of Nestle Lanka PLC.