April 30, 2025/Cordros Report

NESTLE published their Q1-25 unaudited results this morning, reporting an earnings per share of NGN38.07 in Q1-25, a sharp recovery from the loss per share of NGN180.01 in Q1-24.The performance was driven by strong revenue growth (+60.7% y/y) and reduction in FX loss (-99.9% y/y). 

Revenue advanced by 60.7% y/y in Q1-25, driven by robust growth across the Food (+61.6% y/y | 64.1% of revenue) and Beverages (+59.1% y/y | 35.9% of revenue) segments. We attribute the strong revenue growth to sustained demand and strategic price increases, with our channel checks indicating an average price hike of 20.5% during the period. 

The strong top-line growth led to a 13.86ppts y/y expansion in gross margin to 40.6%, as cost of sales grew at a slower pace (+30.3% y/y), reflecting a 22.3% y/y increase in raw material costs (52.9% of cost of sales) and a 55.2% y/y jump in overheads (27.2% of cost of sales). As a result, EBITDA and EBIT margins improved to 28.1% (+152bps y/y) and 25.1% (+137bps y/y), respectively, despite a steep 62.8% y/y rise in operating expenses. 

A major highlight was the sharp 89.4% y/y decline in net finance costs to NGN22.99 billion (Q1-24: NGN217.01 billion), largely due to the near-elimination of FX losses (-99.9% y/y), following improved currency stability. 

Ultimately, the company posted a profit before tax of NGN51.15 billion in Q1-25 (Q1-24: pre-tax loss of NGN196.09 billion), while net profit came in at NGN30.18 billion (Q1-24: net loss of NGN142.68 billion), despite a high effective tax rate of 41.0%. 

Comment: We like NESTLE’s ability to sustain its Q4-24 earnings momentum into Q1-25, reinforcing the company’s resilience amid rising competition. Looking ahead, we expect a robust operating performance in 2025E, underpinned by NESTLE’s diverse product portfolio, strategic pricing, innovation-driven product upgrades, improved local sourcing, and a relatively stable cost and exchange rate environment. Our estimates are under review.