July 31, 2026/Cordros Report
Nestle Nigeria Plc (NESTLE) published its unaudited Q2-26 results after close of business yesterday (30 July), with EPS increasing 26.4% y/y to NGN32.52, bringing H1-26 EPS to NGN81.72 (+28.1% y/y). The strong earnings performance was driven by modest revenue growth (+13.4% y/y), alongside a 219bps y/y and 65bps y/y improvement in both gross and EBITDA margins. In addition, a 32.1% y/y decline in net finance costs provided further support to profitability, largely offsetting the impact of a 612bps y/y increase in the effective tax rate.
NESTLE’s revenue grew by 13.4% y/y in Q2-26 (H1-26: +12.0% y/y), supported primarily by the residual impact of prior pricing actions. Growth was driven by the Beverages segment, where revenue increased by 26.1% y/y (H1-26: +22.1% y/y), lifting its contribution to group revenue to 36.7% from 33.0% in Q2-25. Meanwhile, the Food segment remained the largest contributor, accounting for 63.3% of revenue despite a slower 7.2% y/y growth (H1-26: +6.7% y/y), reflecting a moderation from the strong prior-year base.
Sequentially, group revenue edged down 0.5% q/q, driven by a 4.7% q/q decline in Beverages revenue, which more than offset the 2.2% q/q growth in the Food segment.
Gross margin expanded by 219bps y/y to 39.0% (H1-26: +102bps to 39.7%), as revenue growth (+13.4% y/y) outpaced cost of sales growth (+9.5% y/y; H1-26: +10.1% y/y). Consequently, EBIT and EBITDA margins improved by 64bps and 65bps y/y to 20.3% and 23.6%, respectively (H1-26: +72bps and +65bps to 21.7% and 24.9%), reflecting stronger gross profitability. However, the 23.6% y/y increase in operating expenses (H1-26: +23.8% y/y), driven primarily by a 27.7% y/y rise in marketing and distribution expenses (H1-26: +27.0% y/y), tempered the pace of operating margin expansion.
Net finance costs declined by 32.1% y/y to NGN12.93 billion (H1-26: -65.3% y/y), reflecting FX gains of NGN17.38 billion (Q2-25: nil), which lifted finance income partly offsetting the 57.0% y/y increase in finance costs. The higher finance costs were largely attributable to a 29.3% y/y increase in interest expense on bank borrowings.
Consequently, profit before tax increased by 42.3% y/y to NGN53.00 billion (H1-26: +43.4% y/y to NGN126.77 billion). However, the higher tax charge moderated bottom-line growth, with profit after tax rising 26.4% y/y to NGN25.78 billion (H1-26: +28.1% y/y to NGN64.78 billion).
Comment: While H1-26 earnings continued to benefit from lower net finance costs, Q2-26 reflected stronger operating performance, with gross margin expansion driving improved profitability. As the contribution from pricing actions moderates, we expect earnings growth to rely increasingly on volume recovery, disciplined cost management and continued progress in local sourcing. Key risks to our outlook include weaker-than-expected consumer demand, higher energy costs and FX volatility, which could pressure margins and earnings. Our estimates are under review.