Home > Nestlé Pakistan posts 20% increase in profit

Nestlé Pakistan posts 20% increase in profit

Earnings amount to Rs7.7b in Jan-Sep, gross profit margin increases to 34.3%. PHOTO: FILE

Earnings amount to Rs7.7b in Jan-Sep, gross profit margin increases to 34.3%. PHOTO: FILE


On the back of improved margins, Nestlé Pakistan boosted its net earnings by more than one-fifth to more than Rs7 billion during the nine-month period that ended on September 30, 2015, the company’s financial results revealed on Friday.

The Pakistani subsidiary of the world’s largest foods company reported a net profit of Rs7.7 billion or Rs169 per share for January-September period of 2015, up 20% when compared to Rs6.4 billion or Rs141 per share it earned in the corresponding period of 2014.

The company saw its revenues, for the period under review, increase by 4% to Rs77 billion compared to Rs74 billion in the corresponding period last year. The results were also accompanied by an interim cash dividend of Rs50 per share, which was in addition to the previous interim cash dividend of Rs50 per share.

Unlike its local rival, Engro Foods, the Swiss foods giant is usually off the radar of market analysts for not being a liquid stock – the company has a very small free float (4.5 million shares), majority of which are held by foreign buyers. It is, therefore, hard to find analysts’ comments and market reaction for this particular stock.

“Despite prevalent socio-political situation of the country and the energy crisis, Nestlé Pakistan has witnessed an overall increase in its total revenue by almost Rs2.9 billion,” the company said in a press release.

Explaining, it said the gross profit margin increased by over 500 basis points compared to last year, mainly due to extended cool weather positively impacting milk flush and relatively stable fresh milk prices – the company’s gross margin improved from 29.1% in January-September 2014 to 34.3% in the corresponding period in 2015.

“The prices of dairy-related commodities in international market combined with strong Pakistani rupee have positively impacted the input cost,” said the press release. It further added that the company’s operating profit for the first nine months of 2015 increased to Rs13.6 billion, translating into 19% growth in comparison to the same period in 2014.

The result was below expectations in the third quarter when compared to the previous quarter and the same quarter of 2014, Taurus Securities Head of Research Zeeshan Afzal said. The growth in nine-month earnings was due to an excellent first quarter result, he said.

Afzal said the fall in quarterly earnings can be attributed to a lean milk cycle, recent hike in milk prices and rise in international milk prices. Sales revenue declined in the third quarter but margins remained stable, indicating volumes fell slightly, he said. Operating expenses also increased mainly because of media campaigns, he added.

Published in The Express Tribune, October 17th, 2015.

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