Nestlé Lanka 3Q bottom line helped by lower costs

Nestlé Lanka PLC, the local unit of the world’s largest food company, saw its September quarter (3Q18) net profits increasing 15.6 percent year-on-year (YoY) to Rs.941 million, as the company managed to contain its costs despite a drop in sales figures.   

The firm’s cumulative profits for the nine months ended on September 30, 2018 also recorded an increase of 6.7 percent YoY to reach Rs.10.5 billion. 

According to the interim financial accounts released to the Colombo Stock Exchange last Tuesday, Nestlé Lanka’s turnover during the quarter under review declined 3.5 percent YoY to Rs.9.3 billion.

However, the firm managed to reduce the cost of sales by 12.1 percent YoY to Rs.5.58 billion, increasing the gross profit by 13 percent YoY to Rs.3.7 billion. 
Nestlé Lanka’s cumulative turnover for the nine months improved 1.2 percent YoY to Rs.27.9 billion, while the cost of sales declined by 3.4 percent YoY to Rs.17.3 billion. 

Nestlé Lanka’s earnings per share for the quarter under review improved to Rs.17.52, from Rs.15.16. The total earnings per share so far in the financial year also rose to Rs.48.77, from Rs.45.72.

The firm’s tax expenses continued to rise as seen in the previous quarters of the year, as Nestlé Lanka was subjected to higher effective tax rates from April, under the new Inland Revenue Act. 

The interim financial accounts showed that Nestlé Lanka’s income tax expenses had jumped by 50.3 percent YoY to Rs.2.6 billion so far in the financial year. 
Nestlé Lanka earlier qualified for a concessionary tax rate of 12 percent for export profits, a 10 percent tax rate for profits from the ready-to-drink milk business, while the profits with respect to the offshore business earned in foreign currency were exempted from income tax.

Nestlé Lanka faced a challenging period during last financial year as the food and beverage industry was adversely impacted by the drought and floods, resulting in weak consumer confidence and a decline in consumer demand.

Switzerland’s Nestlé S.A. owns 90.82 percent of Nestlé Lanka PLC.