NESTLÉ PLC: POINTING THE WRONG WAY.

When Nestle PLC released its figures recently accompanying explanatory notes pointed to higher operational costs and the Naira devaluation as its major challenges within the period.
Fortunately, the company not only caged them but as a matter, did not really put its finger on it's real challenge: High finance costs.
According to the figures Nestle closed September 2015 with 5.19% rise in revenue to N107986m from N102655.4m.
Now, because of cost saving and higher efficiency, cost of sale rose by only 2.77% to approximately N59975m thus leading to 8.35% increase in gross profit.
Then total expenses came to about N23334m up 5.1% on September 2014's N22201.8m again leading to 11.6 % increase in profit recorded from its operations.
Of course, this should have landed the company in real profit before tax growth above growth in income but it didn't. Instead, the reported figure came to 20814m up only 3.25% on N20158m previously. Why?
Simple. This was because net finance cost almost doubled to N3862.4m from N1944,5m ( 98.6% higher).
Yet, apparently needing cash to help bring down this growth rate, Nestle is paying N10 per share dividend soon. Could that be the reason for downplaying the weight of net finance costs?
THUS:
* Yes Nestle has done well managing operations costs but it certainly will reap more by being conscious of it's cash flow and decisions that impact on it notably negatively.
* Kudos for not flowing with impression that even challenges facing manufacturers today in Nigeria can not be managed.

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