01 Aug 2018 ( Lagos ) : On an annualised basis, Nestle’s H1 PBT of N31.8bn is tracking well ahead of consensus 2018E PBT estimate of N58.2bn. Therefore, analysts expect upward adjustments to consensus estimates on average. Y/y, Nestle’s Q2 PBT of N18.2bn grew 79% y/y and 34% q/q respectively. The positive surprises on the gross margin line (as gross margin expanded by +305bps y/y to 44%) and a net finance income of N598m are commendable. Analysts believe the market will react positively to these numbers.  

On a positive note, Q2 sales of N67.8bn were up 12% y/y, while PBT and PAT grew 79% y/y and 57% y/y respectively. As stated above, the gross margin expansion and net finance income helped. Unlike recent quarters, Nestle posted an fx-related income of N588m. Compared with analyst's estimates, while Q2 sales were in line, PBT beat by 33%.

Analysts rate the stock Underperform.

Source : Uwadiae Osadiaye CFA and Gregory Kronsten, Olubunmi Asaolu, Chinwe Egwim from FBNQuest Capital Limited.

Reporting for EasyKobo on Wednesday, 1 July 2018 in Lagos, Nigeria