Lower margins, higher tax expenses overshadow Nestlé Lanka fourth quarter earnings

Despite higher sales, Nestlé Lanka PLC, the local unit of Swiss food giant, reported lower earnings for the December 2020 (4Q20) quarter, amid margin contraction and higher effective tax rate.

The company recorded revenue of Rs.9.9 billion for the quarter under review, up 4.8 percent year-on-year, but cost of sales grew at a faster pace of 6.4 percent YoY to Rs.6.7 billion, resulting in a gross profit of Rs.3.1 billion, up by just 1.3 percent.

The company saw its marketing, selling and distribution expenses rising by six percent YoY to Rs.1.48 billion, which resulted in an operating profit of Rs.1.01 billion, down 2.2 percent YoY.

Accordingly, the company’s earnings for the period under review were Rs.12.85 per share or Rs.690.5 million compared to earnings of Rs.13.40 per share or Rs.716.8 million reported for the corresponding period of last year.Meanwhile, for the full financial year ended December 31, 2020, Nestle Lanka saw its earnings improving by 14.8 percent YoY to Rs.2.9 billion on revenue of Rs.37.8 billion, up 4.2 percent.The company’s income tax expense for 4Q20 rose 10.2 percent YoY to Rs.286.3 million and for the full year by 9.4 percent YoY to Rs.1.31 billion.Nestlé S.A. owns 91 percent of the issued shares of Nestlé Lanka PLC.