Nestle Pakistan’s half year profit decline by 30% amid economic slowdown

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Nestle Pakistan’s half year profit decline by 30% amid economic slowdown

  • Company reported Net profit of Rs. 4.4 billion, down from Rs. 6.3 billion in last year
  • Economic slowdown and rising inflation taking toll on Nestle’s Sales

Nestle Pakistan Ltd (NESTLE) reposted Half Year Financial Result where it posted Net Profit of Rs. 4.47 billion as compared to Rs. 6.3 billion in the half year of 2018 marking a decline of 29%.

Sales Revenue was down by 8% as the company struggles to maintain volume amid rising prices and inflationary environment.

NESTLE’s Gross Margins also deteriorated to 29% as compared to 33% in last year. Declining sales led to a decline in Distribution expenses which reduced by 11%.¬†

Increased Finance Cost amid Working Capital Woes

A significant increase in Financ Cost was witnessed as it surged by 82% to Rs. 1.48 billion. As per news flow, NESTLE’s Working Capital cycle has prolonged owing to the economic recession. Distribution agents have been asking for longer credit as recoveries from retailers remain under stress. Resultantly, NESTLE has availed Short Term Lines from Banks accruing higher finance cost as Interest Rates have increased.

Nestle Pakistan has increased its product prices in the last six months responding to the rising cost of manufacturing. Despite increase in prices, a reduction in sales was witnessed which points to declining Sales Volume.

Nestle Pakistan’s (PSX: NESTLE) share price was trading at 52 weeks low. Previously its share price had touched all-time high of Rs.12,000/share. However, it is now trading at Rs.6,000/share, a 50% decline.

Rupees in Million 1H2019 1H2018 % Change
Sales 57,789 62,585 -8%
Gross Profit 17,014 20,422 -17%
Distribution & Selling Expenses (6,939) (7,837) -11%
Admin Expenses (1,659) (1,629) 2%
Operating Profit 8,415 10,954 -23%
Finance Cost 1,480 814 82%
Other Operating Exp 712 848 -16%
Other Income 158 120 32%
Profit Befoe Tax 6,380 9,412 -32%
Tax 1,908 3,102 -38%
Profit After Tax 4,472 6,309 -29%
Earnings Per Share 98.61 139.12

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