Nestle Pakistan (NESTLE) announced record 1Q2015 earnings of Rs 3.6bn (EPS Rs 81) as against Rs 2bn (EPS Rs 45.8) in the same quarter last year. This result was well above market consensus estimates. Nestle Pakistan, the country's largest FMCG with market cap of $4.2bn, posted surprisingly positive result for 1Q2015.
Net profits grew 77% YoY and 141% QoQ led by record margins of 37.6pc 1Q2015 net sales of Rs 25.3bn were up 14pc YoY and 6pc QoQ. Close to 80pc of Nestle Pakistan's sales is from 'Milk & Nutrition' segment while 'Beverages' contributes 19pc. Nestle Pakistan recently reduced price of its UHT (Ultra High Temperature) product (packed milk) by 8pc to defend its market share as its competitor (EFOODSs) was selling packed milk at lower price.
Interestingly, quarterly Gross Margins (37.6%) and Operating Margins (22.3pc) were at all-time high, contributed by decline in international raw milk powder prices and low energy costs. Excellent bottom line growth on YoY basis was in spite of the fact that there was one time exchange rate gain estimated to be close to Rs 400mn in 1Q2014 which was not seen this time. NESTLE has posted 4-year sales and profit CAGR of 19% and 21% respectively. Since international milk powder prices are down 42% YoY to $2,819/ton in 1Q2015, and inflation down to 11-year low of 2.5% in Mar 2015, the NESTLE is expected to continue its current sales and margins trajectory in 2015.