December 25, (THEWILL) – Nestle Nigeria Plc had a good third quarter (Q3) 2021 report (July – September). However, the aching spot of high finance cost has lingered since the year. This would, inexorably, impact on the bottom line and further lower the dividend graph that almost hit the bottom of the trough in 2020.
At a glance, the foremost food manufacturing and marketing company’s revenue haul had a 25.7 percent jump from N71.73 billion in Q3 ’20 to N90.15 billion in the reporting period. At the nine-month level (January – September), the trend was the same: from N212.73 billion in the corresponding period (of the preceding year) to N261.59 billion in the review period, representing a 23 percent increase.
This dragged the bottom line as profit after tax (PAT) rose by 17.5 percent from N10.11 billion to N11.85 billion in Q3 ’20 and Q3’ 21 respectively. For nine months to September 2021, PAT rose to N33.58 billion in Q3 ’21 from Q3 ’20 figure of N31.97 billion. Basic earnings per share (EPS) also moderated upwards to 14.95 kobo in the reporting period from 12.76 kobo in Q3 ’20, a rise of 17.2 percent.
But unlike the top and bottom lines which moderated upwards during the period thus providing a soothing relief from the combined effects of COVID-19 restrictions and the 15-month land border closure, the consumer goods firm is severely pained by the significant upward jump in finance cost. Finance cost (FC), also known as the cost of finance (COF), is the cost, interest and other charges involved in the borrowing of money to build or purchase assets during a given period. This increases operating expenses, reduces profit and dividend payable.
In Q3 ’21, Nestle’s finance costs jumped from N687.58 million in Q3 ’20 to a whopping N2.34 billion in the review period – an increase of 246.6 percent. This mirrors the trend at nine-month level to September 30, which shows a huge spike of 253.7 percent, from N1.62 billion to N5.73 billion in 2020 and 2021 respectively.
Net finance cost, which is finance cost less finance income (such as interest on deposit or foreign exchange gains) was N1.58 billion in Q3 ’21, an upward jump of 245 percent from N458.32 billion in the corresponding period (of the preceding year). As of nine months to September 30, the picture is no less worrying. Nestle’s net finance cost leaped from N923.65 million in 2020 […]
