•Revenue of NGN244.2bn reported was 34% higher vs. 2016FY, but slightly below consensus NGN245.9bn
•EBITDA of NGN62.18bn was 41% higher vs. 2016FY, and well-above consensus NGN58.5bn
•Finance charges dropped by 27.6% to NGN15.1bn
•PAT was NGN33.7bn, 326% higher vs. 2016FY, and above consensus NGN29.9bn
•Compared to our estimates, revenue and EBITDA trailed by 4% and 7% respectively while PAT beat by 9%
•Final dividend of NGN27.5 was declared, equating to NGN42.5 for the year (vs. our estimate of NGN38.2) and 3% yield on last closing price
•For Q4-17, though revenue was higher by 12.4% y/y, it declined 7% q/q, suggesting possible lower sales volume. Compared to our estimate, sales revenue was down 14%
•Gross margin in Q4-17 was 42.4%, -219 bps y/y and -107 bps q/q, and in line with our estimate
•Opex grew 17% y/y and 11% q/q. The reported 21% ratio to sales is consistent with our estimate, and is greater than the 20% reported in Q4-16 and 9M-17 average of 17.7%
•EBIT margin of 21% was lower 309 bps y/y and 447 bps q/q
•The surprising declines in finance income (-102% y/y and 104% q/q) and finance charges (120% y/y and 97% q/q) are noteworthy. Net forex loss in Q4 was NGN20 million – the lowest recorded during the year
•While PBT fell 23% y/y (+23% q/q), PAT grew 44% y/y (67% q/q) on significantly lower effective tax rate of 13% (vs. 54% in Q4-16 and 36% in Q3-17)
Overall, NESTLE’s 2017FY result is impressive. We note however, the lower-than-expected sales in Q4 as a negative surprise. Our estimates are under review.
Ratios 31-Dec-17 31-Dec-16 Q4-2017 Q3-2017 Q4-2016
Gross margin 41.31% 41.41% 42.42% 43.49% 44.6%
OPEX margin 18.50% 20.40% 21.01% 17.61% 20.1%
EBIT margin 22.81% 21.01% 21.41% 25.88% 24.5%
PBT margin 19.18% 11.85% 20.96% 15.82% 30.6%
PAT margin 13.81% 4.36% 18.24% 10.16% 14.2%
Cost of sales margin 58.69% 58.59% 57.58% 56.51% 55.4%
Interest cover 3.69x 1.83x 56.90x 2.2x -11.5x
Tax rate 27.98% 63.22% 13.00% 35.81% 53.6%
RoAE 89.03% 23.01%
RoAA 21.32% 5.49%
EPS (N) 42.55 10.00
PE 32.91x 57.01x
BVPS(N) 56.62 38.96
PBV 24.73x 14.63x
Interim dividend 15.00 0.00
Final dividend 27.50 10.00
Dividend yield (final) 1.96% 1.75%
Dividend yield (total) 3.04% 1.75%
