May 4, 2026/Cordros Report
Nestle Nigeria Plc (NESTLE) published its Q1-26 unaudited results (30 April), reporting EPS of NGN49.20 (+29.2% y/y). The earnings performance was driven by modest revenue growth (+10.6% y/y) and sharp decline in net finance costs (-92.8% y/y).
NESTLE grew revenue by 10.6% y/y in Q1-26 (Q1-25: +144.0% y/y), supported primarily by modest volume growth in the Beverages segment. Segmentally, Beverages was the key growth driver, expanding by 18.4% y/y and increasing its contribution to 38.4% of total revenue (Q1-25: 35.9%). In contrast, the Food segment grew by 6.5% y/y, underperforming group growth but remaining the dominant contributor to revenue.
On a quarter-on-quarter basis, revenue rose marginally by 0.9%, driven by a 6.5% increase in Beverages, while the Food segment declined by 2.3%, reflecting softer demand across core categories.
Gross margin contracted marginally by 11bps y/y to 40.5%, as cost of sales growth (+10.8% y/y) outpaced revenue expansion. The faster cost growth was driven by a 19.0% y/y increase in raw material costs. However, on a quarter-on-quarter basis, cost of sales declined by 9.4%, indicating a sequential easing in cost pressures.
Below the gross line, EBIT and EBITDA margins contracted by 201bps and 187bps to 23.1% and 26.3%, respectively. This was driven by a sharp increase in operating expenses (+24.7% y/y), as the group intensified marketing and distribution spend (+26.1% y/y) to defend market share and deepen penetration amid softer topline momentum.
Importantly, the group’s net finance costs declined sharply by 92.8% y/y, offsetting the impact of weaker operating leverage. This was primarily driven by FX gains of NGN14.76 billion (Q1-25: Nil), which boosted finance income (+3,116.9% y/y) during the period. In addition, finance costs declined by 27.9% y/y, reflecting lower interest expenses on financial liabilities (-27.5% y/y), further supporting the overall reduction in net finance charges.
Consequently, profit before tax increased by 44.2% y/y to NGN73.77 billion (Q1-25: NGN51.15 billion). However, a steep rise in tax expenses (+65.8% y/y) moderated bottom-line growth, with profit after tax up 29.2% y/y to NGN39.00 billion (Q1-25: NGN30.18 billion).
Comment: NESTLE’s Q1-26 earnings were underpinned by FX gains on FCY-denominated balances, cushioning the impact of weak topline growth and negative operating leverage. Looking ahead, earnings performance will remain contingent the group’s ability to: (1) drive volume growth, given the limited scope for further pricing support, and (2) contain costs while sustaining market share and deepening penetration. Our estimates are under review.
