Ayesha Mudassar

Nestle Pakistan Limited (NESTLE) reported a decrease of 22% in net profit for the first nine months of the calendar year 2024, with earnings falling to Rs12.2 billion from Rs15.7 billion during the same period last year, reports WealthPK.

The challenging economic environment, exacerbated by introducing new taxes under the 2024-25 Finance Bill, resulted in price increases putting pressure on the topline growth. This coupled with lower sales and rising commodity and energy costs further eroded profitability. In the first nine months of the calendar year 2024, the net sales were recorded at Rs149.2 billion, a slight decline from Rs151.1 billion in the corresponding period of the previous year. According to the income statement, the finance cost rose by 17% due to new borrowings at normal rates and repayment of subsidized loans.

On the taxation front, the company registered a lower tax liability of Rs8.5 billion against Rs9.2 billion in 9MCY23, reflecting a year-on-year (YoY) decline of 8%. Nestle Pakistan Limited is a public limited company incorporated in Pakistan under the repealed Companies Ordinance 1984 (now Companies Act 2017).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 selling of dairy, nutrition, beverages, and food products. As of December 31, 2023, the company had a total of 45.3 million outstanding shares held by 1,097 shareholders.

The largest shareholding category comprises the associated companies, undertakings, and related parties, with a stake of 81.5% of the shares. This is followed by the local public, which accounts for 13.5% of the company's shares. Directors, CEO, their spouses, and minor children hold 3.2% shares while institutions and public sector companies possess 1.14%. The insurance companies represent a minimal 0.01% of the outstanding shares. The remaining shares are distributed among various other categories, including insurance and foreign companies, each holding less than a 1% stake in the company.

Historical Performance (2019-2023)

Nestle Pakistan has demonstrated consistent growth in both sales and net profit since 2019. Over the past six years, the company has experienced a steady increase in gross and net profits. In 2020, NESTLE achieved a moderate YoY growth of 2.4%, reaching Rs118.7 billion. This growth was driven by continuous product supply and availability, innovation and renovation initiatives, and expansion of distribution networks.

The improvement in gross and net profits was largely a result of various cost-saving initiatives, optimization projects, and prudent pricing strategies. In the following years – 2021, 2022 and 2023 – the company maintained its growth trajectory, reporting increases in both revenue and profitability. This growth was primarily attributed to the localization of raw and packaging materials, a favourable product mix, stringent control over fixed costs, and higher export volumes.

Credit: INP-WealthPk