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Nestle Nigeria Turns Equity Capital into Net Income Faster than Peers

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Over the past three decades, Nestle Nigeria has remained the most efficient consumer goods firm in the country, delivering higher return on equity to shareholders.

It is interesting that the firm effectively uses money contributed by its owners and cumulative net profit to produce income.

The firm achieves this rare feat even amid two recessions brought on by lower crude oil price while red-hot inflation since 2015 coupled with protracted foreign exchange scarcity and supply chain challenges undermined sector players.

F0r instance, Nestle Nigeria recorded a return on average equity (ROAE) of 187.28 percent as at December 2021, according to MoneyCentral calculations.

That is an astonishingly gap when compared to Unilever’s ROAE of 5.28 percent; Cadbury’s 5.91 percent; Vitafoam, 35.54 percent; Flour Mills of Nigeria (FMN), 9.21 percent; Nigeria Breweries, 7.37 percent; Guinness, 10.55 percent; Honeywell, 1.94 percent; PZ Cussons, 4.91 percent; Dangote Sugar, 17.41 percent; Nascon Allied, 20.31 percent, and  BUA 30.33 percent.

Nestle has a diversified product base that contributes to earnings growth and its Nescafe and maggi cube are in the kitchen of most households across the country.

The consumer goods giant saw revenue grow by 23 percent to N351.82 billion in December 2021 from N287.04 billion the previous year.

It rewards shareholders by way of steady dividend payment, little wonder it’s stocks remain attractive to investors who crave for value creating bellwether companies.

The directors propose a final dividend of N25.50, from current year profit (2020:N35.50) per share on the issued share capital of 792,656,252 (2020:792,656,252) ordinary shares of 50k each, subject to approval by the shareholders at the Annual General Meeting.

Nestle has a dividend yield of 3.65 percent, but its shares are overpriced with a price to earnings ratio of 23.06 percent.

Nestlé Nigeria is one of the largest food and beverage companies in Africa. For over 59 years, the company has been delighting consumers around Nigeria by consistently delivering high quality nutritious food.

With a staff strength of over 2,200 direct employees, 3 manufacturing sites, 7 branch offices and a head office located in Lagos, the company produces and markets several iconic brands including NESTLÉ PURELIFE, GOLDEN MORN, MILO, MAGGI, and NESCAFÉ.

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