The review of Net Profit Margin witnessed a declining trend. The Net Profit Margin declined from 13.66% in 2020 to -17.17% in 2024.
The average EBIT Margin for the period under analysis was 17.51%, with 2023 and 2024 performing the worst and best, respectively.
The Inventory turnover stood at 3.74 times in 2024 from 3.21 in 2020, implying a high performance on Inventory of the business in relation to revenue.
The Asset turnover stood at 1.12 times in 2024 from 1.17 in 2020, implying a low performance on Assets of the business in relation to revenue.
Profitability
The revenue of Nestle has increased year on year. The revenue increased by 22.55% between 2020 and 2021 and a further 27.00% increase was recorded between 2021 and 2022. There also occurred a decrease of 75.25% between 2023 and 2024 (the current period).
Nestle’s performance in profitability looks good as the return on capital employed also recorded good performance during the period of analysis.
Liquidity
The company’s liquidity position weakened, as the current ratio/acid test declined from 94:1 to 0.46:1 in the last year. This implies that the company does not have sufficient liquid assets to meet its current liabilities, raising concerns about short-term solvency.
Capital Structure
Nestle is both equity and debt financed.
The company’s debt-to-equity (D/E) ratio has shown a deteriorating trend over the five-year period. From 3.62 in 2021 it spiked to 5.13 in 2022, reflecting a heavy dependence on debt financing. In 2023 and 2024, the ratio turned negative (–5.16 and –7.08), indicating negative equity. This suggests the company’s capital structure has become highly unsustainable, with liabilities exceeding shareholders’ funds and raising serious concerns about solvency.
