Nestlé Nigeria shows resilience with revenue growth of 32.96%

Nestlé Nigeria Plc (“Nestlé Nigeria” or “the Company”) has continued to demonstrate resilience and operational strength in the face of Nigeria’s challenging macroeconomic climate. The company’s unaudited financial results for the nine months ended September 2025 (9M 2025) reveal a strong performance across all key financial metrics, highlighted by impressive revenue growth, expanding margins, and a significantly improved balance sheet position.

At a current market price of ₦1,915 per share (as of October 24, 2025), and a target price of ₦2,063.15, the stock presents a 7.74% potential upside, supporting a HOLD rating on valuation grounds. The performance reflects sustained recovery momentum, disciplined cost management, and a clear focus on restoring profitability after a volatile 2024. Ticker: NESTLE NL (Bloomberg)

Earnings Snapshot

Nestlé Nigeria’s 9M 2025 results showed a return to robust earnings growth, reversing prior-year losses and positioning the company for full-year profitability. Revenue climbed 32.96% year-on-year (y/y) to ₦884.54 billion compared to ₦665.29 billion in 9M 2024. This strong performance was largely driven by local operations, which contributed 99.33% of total revenue and recorded a 33.00% increase year-on-year. Export revenue also advanced by 26.19%, boosted by increased sales to Ghana and improved supply chain efficiency.

Revenue Growth and Segment Analysis

Nestlé’s growth was broad-based across its two major business lines. The Food business, which accounted for 65.38% of total revenue, expanded by 36.32% year-on-year to ₦578.35 billion, while the Beverage segment grew by 27.03% to ₦306.19 billion. These gains underscore the company’s ability to maintain strong consumer demand through effective pricing, product innovation, and sustained brand loyalty despite persistent inflationary pressures.

The revenue expansion reflects the company’s well-calibrated pricing strategy, targeted marketing efforts, and increasing penetration in semi-urban and rural markets. Nestlé also benefited from improved plant reliability and strategic cost optimisation in production and distribution, which helped mitigate raw material and logistics cost increases.

Margin and Profitability

Profitability improved sharply, reflecting a slower increase in cost of sales relative to revenue growth. Cost of sales rose 20.35% y/y, compared to the 32.96% y/y rise in revenue, resulting in a significant gross margin improvement to 44.01%, up from 33.72% in 9M 2024. Similarly, EBITDA margin rose to 23.62% from 19.49% in the prior year, signalling stronger cost efficiency and improved operating leverage.

A major turning point in the company’s profitability was the ₦20.75 billion net exchange gain, a complete reversal from the ₦285.29 billion foreign exchange loss recorded in 2024. This contributed to a remarkable turnaround in the bottom line, with net profit reaching ₦72.48 billion, compared to a ₦184.27 billion net loss in 9M 2024. This translated to a net profit margin of 8.23%, confirming Nestlé’s successful navigation of FX volatility and cost headwinds.

Balance Sheet and Capital Structure

Nestlé Nigeria continues to reinforce its balance sheet through active deleveraging and improved cash flow management. The company repaid an additional US$20 million in intercompany loans during Q3 2025, bringing total repayments to US$40 million year-to-date, as part of its strategy to reduce foreign exchange exposure and strengthen financial stability.

Equity position also improved materially, rising by ₦92.38 billion year-on-year, which narrowed the accumulated deficit to ₦19.70 billion. This progress supports management’s expectation of achieving a positive equity balance by FY 2025 and generating distributable retained earnings by FY 2026, setting the stage for a potential resumption of dividend payments in the near term.

Q3 2025 Performance (Quarter-on-Quarter Analysis)

On a quarterly basis, Nestlé Nigeria recorded moderate sequential growth in Q3 2025. Revenue rose 6.00% quarter-on-quarter (q/q) to ₦303.42 billion, while cost of sales increased by 12.28% q/q to ₦192.69 billion. Consequently, gross profit declined 3.40% q/q to ₦110.72 billion, and gross margin moderated slightly by 4 basis points (bps) to 36.49%.

Similarly, EBITDA margin eased to 19.57% (from 22.82% in Q2 2025), reflecting seasonal cost pressures typical of mid-year operations. However, a 40.49% decline in finance costs to ₦11.34 billion provided significant support to the bottom line, helping to maintain a steady net profit margin of 7.22% for the quarter.

Financial Outlook

Looking ahead, we expect FY 2025 to mark a definitive turning point for Nestlé Nigeria’s profitability and margin performance. Revenue is projected to exceed the ₦1 trillion mark, likely within a range of ₦1.09 trillion to ₦1.28 trillion, supported by strong Q4 demand recovery—historically accounting for approximately 30.61% of full-year revenue.

Gross margin is forecast to improve to between 38.00% and 40.01%, compared to 34.78% in 2024, driven by stable input costs, higher volumes, and improved operational efficiency. Furthermore, the company’s sustained deleveraging and positive FX position should continue to enhance earnings quality and liquidity.

With the stock delivering an impressive 118.86% year-to-date gain, Nestlé Nigeria remains one of the strongest defensive plays in the Nigerian consumer goods sector. However, given that it is currently trading close to our fair value estimate of ₦2,063.15, we maintain a HOLD rating, reflecting a balanced risk-return outlook and modest upside potential of 7.74%.

In summary, Nestlé Nigeria’s 9M 2025 results underscore the company’s successful turnaround, characterised by resilient domestic demand, disciplined cost control, improved FX management, and a strengthening capital structure. These factors collectively position the company for sustained earnings growth, robust cash generation, and a return to dividend stability in the coming fiscal years. SOURCE: Coronation Asset Management Limited