March 19, 2025/InvestmentOne Report
Nestlé Nigeria’s revenue growth of 75.32% YoY was driven by price adjustments, though gross profit margins declined from 39.70% in 2023 to 31.95% in 2024. This margin contraction was due to higher production costs resulting from inflation and foreign exchange volatility.
The company reported a gross profit of NGN 306.35 bn, reflecting a 40.98% increase from NGN 217.17 bn in 2023. However, the rise in operating expenses weighed on margins, with operating profit increasing by 35.61% to NGN 167.88 bn, compared to NGN 123.79 bn in 2023.
The operating profit margin declined to 17.51% in 2024, from 22.62% in 2023, indicating that costs grew faster than revenue. Finance costs were a major drag on profitability in 2024, with net finance expenses increasing by 70.99% YoY to NGN 389.46 bn.
This sharp rise was driven by foreign exchange losses and higher borrowing costs. Nestlé Nigeria continued to struggle with its exposure to USD-denominated debt, as the naira’s depreciation significantly increased the cost of servicing foreign loans. Additionally, elevated borrowing rates throughout 2024 further strained the company’s financial position. The combination of rising interest expenses and worsening currency depreciation remains one of the biggest threats to Nestlé Nigeria’s financial stability.
The loss before tax widened to NGN 221.59 bn, representing a 112.98% decline from NGN 104.03 bn in the previous year. Similarly, the loss after tax worsened to NGN164.60 bn, marking a 107.17% decline from NGN (79.47) bn in 2023. At the bottom line, earnings per share (EPS) fell from NGN 100.26 in 2023 to NGN 207.65 in 2024, highlighting the deterioration in net profitability. The company did not declare any dividends for the year, consistent with the previous year.
Balance Sheet: Nestlé Nigeria’s total assets grew by 47.63% YoY, reaching NGN 858.70 bn in 2024, compared to NGN 581.77 bn in 2023. This increase was largely driven by the revaluation of property, plant, and equipment. Despite the growth in total assets, liabilities also increased significantly, rising by 49.19% to NGN 974.82 bn in 2024, from NGN 653.49 bn in 2023.
This increase reflects the company’s continued reliance on borrowings to finance operations. Liquidity remained a major concern, as cash and short-term deposits plummeted by 86.50%, from NGN 167.74 bn in 2023 to NGN 22.64 bn in 2024. The sharp decline in cash reserves raises questions about the company’s short-term financial stability.
Outlook: Nestlé Nigeria is implementing a series of initiatives aimed at addressing its financial challenges and positioning itself for recovery in 2025. The company is also adopting a more strategic pricing approach, ensuring that price increases are balanced with affordability to maintain consumer demand. Given the pressure on consumer purchasing power, the company is carefully adjusting its pricing strategy to sustain market share while protecting profitability.
The company stills remains a premium goods item in Nigerian households however. At this stage, we maintain a NEUTRAL rating on Nestlé Nigeria Plc. A clear improvement in earnings, debt restructuring, and liquidity levels will be key factors in reassessing this outlook in 2025. Investors should closely monitor the company’s cash flow management and foreign exchange exposure before making further investment decisions
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