Nestle Pakistan Limited (PSX: NESTLÉ) after witnessing slow growth in the third quarter came back strong. The Lahore base consumer goods giant notched solid growth in sales and gross margins for the calendar year 2015.

The dairy company which is facing intense competition from Engro Foods has presided over a top line growth of 7 percent year-on-year during the CY15. Its flagship Milk and Nutrition Products segment brought in the significant chunk of top line for the company. Nestle has witnessed growth in its export sector in recent years. Export sales stood at Rs5.7 billion in CY15.

It is worth mentioning here that during the third quarter the company has to face a volumetric decline which has affected the overall top line for the year. Similarly, the company has also reduced its prices in August to compete better with Olper’s of Engro foods.

While Nestle is selling its product well, one should also notice lower core cost during the period under discussion. To keep its cost down, NESTLE took advantage of relatively stable fresh milk prices in the country, the global decline in the prices of powdered milk and strong rupee. These conditions have helped NESTLE to report a 500 bps increase in its gross profit margin for the year.

There is a surge in the distribution cost of Nestle during the year. While the Director’s Report is unavailable, but the milk company has witnessed distraction in its distribution channels due to floods in the country in the third quarter specifically. Nestlé has reported Rs8.9 billion in its profits, that comes up to almost 11 percent increase in its profits from CY 2014.



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Nestle Pakistan LTD

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Rs (mn) CY14 CY15 YoY

Sales - net 96,458 102,986 7%

Cost of goods sold 69,134 68,859 0%

Gross profit 27,324 34,127 25%

Distribution and selling expense 11,085 15,411 39%

Administrative expenses 2,125 2,398 13%

Operating profit 14,113 16,317 16%

Finance cost 2,156 1,724 -20%

Other operating expenses 1,473 2,211 50%

Other income 524 138 -74%

Profit before taxation 11,009 12,520 14%

Taxation 3,080 3,759 22%

Profit after taxation 7,926 8,761 11%

Earnings per share 174.85 193.18 -

Gross profit margin 28% 33% Up 500 BPS

Operating profit margin 15% 16% Up 100 BPS

Net profit margin 8% 9% Up 100 BPS

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Source: PSX notice