NESTLE Nigeria’s profit before-tax dropped by 1.43 percent to N33.38bn for the first half of 2021.
This was disclosed in its un-audited financial statement published on the company’s website.
The consumer goods manufacturer recorded revenue increase of 21.57% in the first six months of the year compared to the corresponding period in 2020.
However, a 262.15 percent jump in finance cost due to interest paid on loans taken to stem the effects of Covid-19 pandemic caused a reduction in its profit before tax from the N33.86bn generated in H1 2020.
“Nestle recorded a whopping jump in borrowings and finance costs in other to shore up its working capital position growing both by 737.13 per cent and 262.15 per cent, respectively, after a devastating 2020,” said analyst from Atlas Portfolios Limited.
“However, despite posting a reduced net profit margin of 19.47 per cent in 2021 H1, the consumer goods giant was able to improve a lot of investors’ confidence after recording a 95.15 per cent return on equity compared to the 68.92 per cent recorded in 2020 H1.
“We expect positive sentiment to trail the stock as economic activities continue to increase, despite the increasing cost of wheat in the global market,” nestle added.
Financial Analysts from Cordros Capital noted that Nestle had maintained top-line growth despite the heightened competition in its operating environment.
They however, said we are concerned about the persistent surge in finance costs arising from the increase in foreign currency debt amid the lingering Naira weakness. Nevertheless, notwithstanding the weakness in margins, we expect the company to maintain positive earnings over the rest of the year.”
On its balance sheet, Nestle recorded long-term loans to equity ratio of 2.23 percent as long-term loans stood at N50.84bn while equity was maintained at N22.84bn.