NESTLE 2018-19 Annual Report Analysis

Tue, 31 Dec

NESTLE has announced its results for the year ended December 2019. Let us have a look at the detailed performance review of the company during FY18-19.

NESTLE Income Statement Analysis

• Operating income during the year rose 9.5% on a year-on-year (YoY) basis.
• The company's operating profit increased by 11.8% YoY during the fiscal. Operating profit margins witnessed a fall and down at 23.6% in CY19 as against 23.2% in CY18.
• Depreciation charges increased by 10.3% and finance costs increased by 15.3% YoY, respectively.
• Other income declined by 4.4% YoY.
• Net profit for the year grew by 22.5% YoY.
• Net profit margins during the year grew from 14.2% in CY18 to 15.9% in CY19.

NESTLE Income Statement 2018-19

No. of Mths Year Ending		12 Dec-18*	12 Dec-19*	% Change
Net Sales	Rs m	112,923	123,689	9.5%
Other income	Rs m	2,600	2,484	-4.4%
Total Revenues	Rs m	115,522	126,173	9.2%
Gross profit	Rs m	26,166	29,243	11.8%
Depreciation	Rs m	3,357	3,702	10.3%
Interest	Rs m	1,120	1,291	15.3%
Profit before tax	Rs m	24,290	26,735	10.1%
Tax	Rs m	8,220	7,051	-14.2%
Profit after tax	Rs m	16,069	19,684	22.5%
Gross profit margin	%	23.2	23.6
Effective tax rate	%	33.8	26.4
Net profit margin	%	14.2	15.9

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NESTLE Balance Sheet Analysis

• The company's current liabilities during CY19 stood at Rs 22 billion as compared to Rs 19 billion in CY18, thereby witnessing an increase of 18.1%.
• Long-term debt stood at Rs 531 million as compared to Rs 351 million during CY18, a growth of 51.2%.
• Current assets fell 19% and stood at Rs 38 billion, while fixed assets rose 0% and stood at Rs 34 billion in CY19.
• Overall, the total assets and liabilities for CY19 stood at Rs 72 billion as against Rs 81 billion during CY18, thereby witnessing a fall of 11%.

NESTLE Balance Sheet as on December 2019

No. of Mths Year Ending		12 Dec-18*	12 Dec-19*	% Change
Networth	Rs m	36,737	19,189	-47.8
Current Liabilities	Rs m	18,550	21,906	18.1
Long-term Debt	Rs m	351	531	51.2
Total Liabilities	Rs m	80,881	71,729	-11.3
Current assets	Rs m	47,370	38,172	-19.4
Fixed Assets	Rs m	33,511	33,558	0.1
Total Assets	Rs m	80,881	71,729	-11.3

NESTLE Cash Flow Statement Analysis

• NESTLE's cash flow from operating activities (CFO) during CY19 stood at Rs 23 billion, an improvement of 11.8% on a YoY basis.
• Cash flow from investing activities (CFI) during CY19 stood at Rs 830 million on a YoY basis.
• Cash flow from financial activities (CFF) during CY19 stood at Rs -36 billion on a YoY basis.
• Overall, net cash flows for the company during CY19 stood at Rs -12 billion from the Rs 7 billion net cash flows seen during CY18.

NESTLE Cash Flow Statement 2018-19

Particulars	No. of months	12	12	% Change
	Year Ending	Dec-18	Dec-19
Cash Flow from Operating Activities	Rs m	20,525	22,953	11.8%
Cash Flow from Investing Activities	Rs m	-524	830	-
Cash Flow from Financing Activities	Rs m	-13,174	-36,015	-
Net Cash Flow	Rs m	6,826	-12,233	-

Current Valuations for NESTLE

• The trailing twelve-month earnings per share (EPS) of the company stands at Rs 204.2, an improvement from the EPS of Rs 166.7 recorded last year.
• The price to earnings (P/E) ratio, at the current price of Rs 14,790.0, stands at 72.4 times its trailing twelve months earnings.
• The price to book value (P/BV) ratio at current price levels stands at 74.3 times, while the price to sales ratio stands at 11.5 times.
• The company's price to cash flow (P/CF) ratio stood at 51.9 times its end-of-year operating cash flow earnings.

Per Share Data/Valuations

No. of Mths Year Ending		12 Dec-18*	12 Dec-19*
Sales per share (Unadj.)	Rs	1,171.2	1,282.8
TTM Earnings per share	Rs	166.7	204.2
Diluted earnings per share	Rs	166.7	204.2
Price to Cash Flow	x	55.1	51.9
TTM P/E ratio	x	66.6	72.4
Price / Book Value ratio	x	24.4	63.3
Market Cap	Rs m	896,078	1,213,782
Dividends per share (Unadj.)	Rs	115.0	342.0

Ratio Analysis for NESTLE

• Solvency Ratios

Current Ratio: The company's current ratio deteriorated and stood at 1.7x during CY19, from 2.6x during CY18. The current ratio measures the company's ability to pay short-term and long-term obligations.

Interest Coverage Ratio: The company's interest coverage ratio deteriorated and stood at 21.7x during CY19, from 22.7x during CY18. The interest coverage ratio of a company states how easily a company can pay its interest expense on outstanding debt. A higher ratio is preferable.

• Profitability Ratios

Return on Equity (ROE): The ROE for the company improved and stood at 102.6% during CY19, from 43.7% during CY19. The ROE measures the ability of a firm to generate profits from its shareholders capital in the company.

Return on Capital Employed (ROCE): The ROCE for the company improved and stood at 142.1% during CY19, from 68.5% during CY18. The ROCE measures the ability of a firm to generate profits from its total capital (shareholder capital plus debt capital) employed in the company.

Return on Assets (ROA): The ROA of the company improved and stood at 29.2% during CY19, from 21.3% during CY18. The ROA measures how efficiently the company uses its assets to generate earnings.

Key Ratio Analysis

No. of Mths Year Ending		12 Dec-18*	12 Dec-19*
Current ratio	x	2.6	1.7
Debtors’ Days	Days	4	4
Interest coverage	x	22.7	21.7
Debt to equity ratio	x	0.0	0.0
Return on assets	%	21.3	29.2
Return on equity	%	43.7	102.6
Return on capital employed	%	68.5	142.1

To see how NESTLE has performed over the last 5 years, please visit here.

NESTLE Share Price Performance

Over the last one year, NESTLE share price has moved up from Rs 8,202.2 to Rs 10,994.3, registering a gain of Rs 2,792.1 or around 34.0%.

Overall, the S&P BSE SENSEX is up 16.3% over the year.

(To know more, check out historical annual results for NESTLE and quarterly results for NESTLE)

Read: Latest Annual Report Analysis of NESTLE