NESTLE 2019-20 Annual Report Analysis

Thu, 31 Dec

NESTLE has announced its results for the year ended December 2020. Let us have a look at the detailed performance review of the company during FY19-20.

NESTLE Income Statement Analysis

• Operating income during the year rose 7.9% on a year-on-year (YoY) basis.
• The company's operating profit increased by 9.3% YoY during the fiscal. Operating profit margins witnessed a fall and down at 23.9% in CY20 as against 23.6% in CY19.
• Depreciation charges increased by 0.1% and finance costs increased by 27.2% YoY, respectively.
• Other income declined by 39.3% YoY.
• Net profit for the year grew by 5.8% YoY.
• Net profit margins during the year declined from 15.9% in CY19 to 15.6% in CY20.

NESTLE Income Statement 2019-20

No. of Mths Year Ending		12 Dec-19*	12 Dec-20*	% Change
Net Sales	Rs m	123,689	133,500	7.9%
Other income	Rs m	2,484	1,508	-39.3%
Total Revenues	Rs m	126,173	135,008	7.0%
Gross profit	Rs m	29,243	31,966	9.3%
Depreciation	Rs m	3,702	3,704	0.1%
Interest	Rs m	1,291	1,642	27.2%
Profit before tax	Rs m	26,735	28,128	5.2%
Tax	Rs m	7,051	7,304	3.6%
Profit after tax	Rs m	19,684	20,824	5.8%
Gross profit margin	%	23.6	23.9
Effective tax rate	%	26.4	26.0
Net profit margin	%	15.9	15.6

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NESTLE Balance Sheet Analysis

• The company's current liabilities during CY20 stood at Rs 25 billion as compared to Rs 22 billion in CY19, thereby witnessing an increase of 13.8%.
• Long-term debt down at Rs 317 million as compared to Rs 531 million during CY19, a fall of 40.3%.
• Current assets rose 10% and stood at Rs 42 billion, while fixed assets rose 10% and stood at Rs 37 billion in CY20.
• Overall, the total assets and liabilities for CY20 stood at Rs 79 billion as against Rs 72 billion during CY19, thereby witnessing a growth of 10%.

NESTLE Balance Sheet as on December 2020

No. of Mths Year Ending		12 Dec-19*	12 Dec-20*	% Change
Networth	Rs m	19,189	20,193	5.2
Current Liabilities	Rs m	21,906	24,926	13.8
Long-term Debt	Rs m	531	317	-40.3
Total Liabilities	Rs m	71,729	78,798	9.9
Current assets	Rs m	38,172	41,851	9.6
Fixed Assets	Rs m	33,558	36,947	10.1
Total Assets	Rs m	71,729	78,798	9.9

NESTLE Cash Flow Statement Analysis

• NESTLE's cash flow from operating activities (CFO) during CY20 stood at Rs 25 billion, an improvement of 6.9% on a YoY basis.
• Cash flow from investing activities (CFI) during CY20 stood at Rs -3 billion on a YoY basis.
• Cash flow from financial activities (CFF) during CY20 stood at Rs -20 billion, an improvement of 46% on a YoY basis.
• Overall, net cash flows for the company during CY20 stood at Rs 2 billion from the Rs -12 billion net cash flows seen during CY19.

NESTLE Cash Flow Statement 2019-20

Particulars	No. of months	12	12	% Change
	Year Ending	Dec-19	Dec-20
Cash Flow from Operating Activities	Rs m	22,953	24,545	6.9%
Cash Flow from Investing Activities	Rs m	830	-3,215	-
Cash Flow from Financing Activities	Rs m	-36,015	-19,559	-
Net Cash Flow	Rs m	-12,233	1,771	-

Current Valuations for NESTLE

• The trailing twelve-month earnings per share (EPS) of the company stands at Rs 216.0, an improvement from the EPS of Rs 204.2 recorded last year.
• The price to earnings (P/E) ratio, at the current price of Rs 18,392.4, stands at 85.2 times its trailing twelve months earnings.
• The price to book value (P/BV) ratio at current price levels stands at 87.8 times, while the price to sales ratio stands at 13.3 times.
• The company's price to cash flow (P/CF) ratio stood at 61.7 times its end-of-year operating cash flow earnings.

Per Share Data/Valuations

No. of Mths Year Ending		12 Dec-19*	12 Dec-20*
Sales per share (Unadj.)	Rs	1,282.8	1,384.6
TTM Earnings per share	Rs	204.2	216.0
Diluted earnings per share	Rs	204.2	216.0
Price to Cash Flow	x	61.0	61.7
TTM P/E ratio	x	72.4	85.2
Price / Book Value ratio	x	63.3	75.0
Market Cap	Rs m	1,213,782	1,514,228
Dividends per share (Unadj.)	Rs	342.0	200.0

Ratio Analysis for NESTLE

• Solvency Ratios

Current Ratio: The company's current ratio deteriorated and stood at 1.7x during CY20, from 1.7x during CY19. 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 18.1x during CY20, from 21.7x during CY19. 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 103.1% during CY20, from 102.6% during CY20. 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 145.1% during CY20, from 142.1% during CY19. 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 declined and down at 28.5% during CY20, from 29.2% during CY19. The ROA measures how efficiently the company uses its assets to generate earnings.

Key Ratio Analysis

No. of Mths Year Ending		12 Dec-19*	12 Dec-20*
Current ratio	x	1.7	1.7
Debtors’ Days	Days	4	5
Interest coverage	x	21.7	18.1
Debt to equity ratio	x	0.0	0.0
Return on assets	%	29.2	28.5
Return on equity	%	102.6	103.1
Return on capital employed	%	142.1	145.1

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 10,994.3 to Rs 16,302.4, registering a gain of Rs 5,308.2 or around 48.3%.

Overall, the S&P BSE SENSEX is down 24.2% 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