Ayesha Mudassar

Sales of Nestle Pakistan Limited (NESTLE) increased by 10% to Rs54.3 billion during the first quarter of the ongoing calendar year 2024,

compared to Rs49.5 billion in 1QCY23, reports WealthPK.

The rise in revenue was supported by a favorable portfolio mix, demand-generating activities, and pricing management initiatives. Furthermore, the continuous focus on ensuring product availability and renovation initiatives contributed to attaining higher revenue.

However, the net profit stood at Rs5.06 billion in 1QCY24 compared to Rs5.6 billion in the corresponding period last year, resulting in an Earning per Share (EPS) of Rs111.75 versus Rs124.85 in the same period last year. The declined profit was due to exchange loss and increased working capital requirements. Going by the income statement, the 24% increase in finance cost was mainly due to new borrowings at normal rates and repayment of subsidized loans. On the tax front, the company paid a higher tax worth Rs3.4 billion against the Rs2.6 billion paid in the corresponding period of last year, depicting a rise of 29% year-on-year (YoY).

Pattern of Shareholding

As of December 31, 2023, NESTLE has a total of 45.3 million outstanding shares held by 1,097 shareholders. Associated companies, undertakings, and related parties, with a stake of 81.5% share, form the largest shareholding category of NESTLE. This is followed by the local public, which accounts for 13.5% of the company's shares. Directors, the CEO, and their spouses, and minor children hold 3.2% of the shares while the institutions and public sector companies have 1.14% of NESTLE’s shares. Insurance companies have a representation of 0.01% in the outstanding share volume of the company. The remaining shares are held by other categories of shareholders, including insurance and foreign companies, each having less than a 1% stake in the company.

Historical Operational Performance (2019-2023)

Nestle Pakistan has consistently observed a growing topline and bottom line since 2019. Furthermore, the gross profit and net profit have been increasing over six years.

In 2020, NESTLE's sales posted a moderate YoY growth of 2.4% to clock in at Rs118.7 billion. The undisrupted supply and availability of products, innovation and renovation initiatives, and numeric distribution expansion have contributed to the company's sales. Improvement in gross and net profit has been achieved through numerous cost-saving initiatives, optimization projects, and prudent pricing management. In subsequent years (2021,2022 and 2023), the company continued its journey towards growth, registering a rise in revenue along with improvement in profitability. The improved profit was on account of the localization of raw and packaging materials, a favourable product mix, strict control on fixed costs, and an increase in exports.

Historical Ratios (2019-2023)

The ratio analysis provides valuable insights regarding Nestle Pakistan’s financial performance over the years, highlighting key indicators such as gross profit margin, net profit margin, and EPS growth ratio.

The gross profit margin, a crucial indicator of how efficiently a company manages its production costs, has shown a consistent trend over the years. In CY 2023, the gross profit margin stood at 35.3%, a slight increase from 34.1% in CY22, 30.4 in CY21, 29.3% in CY20, and 28.8% in CY19. The net profit margin has shown slight fluctuations during the period under consideration. In CY23, the net profit margin was 8.2%, down from 9.3% in CY22, and 9.6% in CY21, but higher than 7.5% in CY20.

About the company

Nestle Pakistan Limited is a public limited company incorporated in Pakistan under the repealed Companies Ordinance 1984 (now Companies Act 2017). The Company is a subsidiary of Nestle S.A, a Swiss-based public limited company. The firm is principally engaged in the manufacturing, processing, and sale of dairy, nutrition, beverages, and food products including imported products.

Credit: INP-WealthPk