February 28, 2025/Cordros Report
Nestle Nigeria Plc (NESTLE) published its 2024FY audited financials yesterday, reporting a loss per share of NGN207.65 (2023FY: NGN100.26), undermined by higher finance costs, which were exacerbated by the impact of naira depreciation on the translation of foreign currency-denominated loans and borrowings. However, Q4-24 standalone EPS printed NGN24.82 (vs loss per share of NGN45.93 in Q4-23), marking its first quarter of positive earnings since Q1-23.
Revenue grew by 75.2% y/y in 2024FY (Q4-24: +95.0% y/y), driven by robust growth across the business segments – Food (+74.3% y/y | 64.3% of revenue) and Beverage (+77.0% y/y | 35.7% of revenue). We attribute strong revenue growth to the impact of higher pricing and resilient demand for NESTLE’s products. On pricing, our channel checks reveal that NESTLE implemented an average price increase of c. 31.3% q/q across their product portfolio.
Gross margin contracted by 774bps y/y to 32.0% (2023FY: 39.7%) driven by a faster growth in cost of sales (+97.7% y/y), which outpaced revenue growth (+75.2% y/y). The elevated costs reflect the impact of high inflationary pressures, notably in raw material expenses (+114.1% y/y) and overhead costs (+88.6% y/y). Consequently, EBITDA and EBIT margins declined to 20.5% (-423bps y/y) and 17.5% (-512bps y/y), respectively, amid a 47.8% rise in operating expenses.
Net finance costs (+71.0% y/y) rose markedly in 2024FY, as a higher foreign exchange loss (NGN290.70 billion | 2023FY: NGN195.07 billion) influenced a 68.2% y/y increase in finance cost. Additionally, interest expense on financial liabilities surged by 165.8% y/y due to a 169.2% increase in interest expense on loans (NGN101.76 billion | 2023FY: NGN37.80 billion).
NESTLE reported a pre-tax loss of NGN221.59 billion (2023FY: NGN104.03 billion). After accounting for a tax credit of NGN56.99 billion, the loss after tax settled at NGN164.60 billion (2023FY: NGN79.47 billion).
Comment: NESTLE’s net operating gains were entirely offset by its foreign exchange exposure related to loans and borrowings during the period. For 2025E, we expect the company to continue protecting its margins by potentially implementing further price adjustments and leveraging its strong market leadership. Additionally, we anticipate that the company will sustain profitability driven by continued revenue growth. Our estimates are under review.
