Monday, March 4, 2013

Did you know? Nestle Lanka PLC – the maker of Nestomalt and Maggi

Kalpanakaranna – A very publicity shy company Nestle Lanka is part of one of the largest multinationals in the world, based in Vevey, Switzerland overlooking lake Lausanne. The group is directed from there.

The shares of Nestle Lanka are listed on the Colombo Stock Exchange. Its market cap is Rs87B accounting for 4% of the SL stock market. They had revenues of approx Rs29B in 2012 on sales of household brands such as Nestomalt, Maggi etc. and profits before tax of Rs3.5B and PAT of Rs3B.

In effect it pays out its whole net profit as a dividend and 91% of the shares are owned by Nestle SA the parent, with 19 other shareholders owning 4%.

Whilst the Company has a NBV of about Rs5B in fixed assets, its total share capital and reserves is only Rs3.8B which includes this year’s profits!

So it is a highly efficient company with NO real investment in money from overseas as of today, which remits Rs3B a year back to its owners, so 10% of every item of Nestle product you buy goes to its owners directly. A Rs270 pack of Nestomalt means Rs27 paid out to the owners overseas as their share. All investments are done by local borrowings.

It is a highly efficient company with minimum capital, well run with little retained profits used for reinvestment! That is how mature multinationals who have no faith in the local economy work. So if SL economy collapses, Nestle has nothing really invested here, except a highly profitable money machine which has increased in value 10 times in the past 4 years. It is income stream that they will miss!

One figure I would like to have is what VAT it pays to the Government on sales, it will give an impression of the value additions of the company, as it is not clear from the accounts, and that its Income Tax is very minuscule, about Rs500M per annum which not a lot for a company with turnover of Rs29B. I would also like to know how much it remits or pays all its foreign consultants, directors and board members, as that too is in effect a remittance out.

There is much Sri Lankan based food companies can learn from Companies such as Nestle with a list of world ranked brands they use to maximum benefit amongst the consumer’s consciousness. It is up to SL companies to give them a run for their money, as I would like to see a good quality product to compete with their Knorr soup powder packets I buy for Rs100 enough for one course for me to make a quick cup of soup! It is hard to beat the strength of their brand positioning, with advertising and promotions to match in a tried and tested mode worldwide. The Company also offers an international employment profile for quality graduates.

1 comment:

Anonymous said...

10x in the past 4 years? Why didn't I invest in that company????