LIVESTOCK FEEDS PLC Q3 Result– Earnings Pressure Deepens Amid Cost Surge and Weak Market Dynamics Despite Strong Balance Sheet Stability

Executive Summary

Livestock Feeds Plc released its unaudited financial statements for the nine months ended 30 September 2025, revealing a notable deterioration in earnings performance driven by persistent cost pressures and weakened revenue momentum. The Company posted a loss after tax of ₦326.54 million for the nine-month period, compared to a profit after tax of ₦1.42 billion in the corresponding period of 2024 — marking a significant year-on-year reversal in profitability. Revenue declined by 2.8% year-on-year to ₦29.77 billion, reflecting a slowdown in sales volumes amid elevated input costs, weak consumer demand, and increased market competition. In contrast, cost of sales rose marginally, squeezing margins and dampening operating profitability. The Company’s operating profit fell 27.2% YoY to ₦2.49 billion, while net finance cost surged more than 100% due to rising interest rates and higher leverage. Despite the earnings pressure, Livestock Feeds maintained a relatively stable balance sheet with total assets of ₦17.58 billion, underscoring its resilience and efficient working capital management. However, the rising debt burden and finance costs underscore the need for capital restructuring and improved cash flow discipline.

Financial Highlights

₦’000 Q3 2025 Q3 2024 % Δ YoY 9M 2025 9M 2024 % Δ YoY

Revenue 8,964,445 13,123,227 -31.7% 29,767,371 28,612,267 +4.0%

Cost of Sales (8,059,525) (10,896,552) -26.0% (25,903,443) (23,917,464) +8.3%

Gross Profit 904,919 2,226,675 -59.3% 3,863,929 4,694,803 -17.7%

Other Operating Income 25,247 22,793 +10.8% 88,415 55,514 +59.3%

Selling & Distribution Expenses (92,739) (101,152)

-8.3% (246,224) (240,006) +2.6%

Administrative Expenses (401,245) (418,744) -4.2% (1,217,672) (1,093,914) +11.3%

Operating Profit 436,183 1,729,573 -74.8% 2,488,448 3,416,397 -27.2%

Finance Income 349 3,933 -91.1% 1,606 4,668 -65.6%

Finance Costs (761,885) (396,668) +92.1% (2,662,581) (1,308,298) +103.5%

Profit Before Tax (325,354) 1,336,837 -124.3% (172,528) 2,112,767 -108.2%

Profit/(Loss) After Tax (428,934) 895,681

-147.9% (326,540) 1,415,554 -123.1%

Basic EPS (kobo) (14.30) 29.86 -147.9% (10.88) 47.00 -123.1%

Revenue and Operational Performance

Livestock Feeds’ revenue trajectory reflects mixed trends across its feed segments. Although the 9-month topline rose marginally by 4.0% YoY, the third-quarter revenue plunged by 31.7% YoY, signalling a sharp slowdown in market demand. The revenue moderation is attributable to declining livestock production activities, higher feed prices, and intensified competition from smaller, regionally focused feed manufacturers offering discounted products.

Cost of sales grew by 8.3% YoY, driven by elevated raw material costs (especially maize and soybean meal), higher energy prices, and logistics challenges. Consequently, gross profit declined 17.7% YoY to ₦3.86 billion, compressing the gross margin to 13.0% (from 16.4% in 9M 2024).

Operating expenses (OPEX) remained under control, rising modestly by 7.6% YoY to ₦1.46 billion**, despite inflationary pressures. The Company’s focus on cost rationalization and operational efficiency partially cushioned the earnings impact of weaker sales. However, finance costs more than doubled to ₦2.66 billion, reflecting increased borrowings and rising interest rates in the domestic credit market. This surge in finance costs was the primary driver of the shift from profit to loss during the review period.

Profitability Analysis

The Company’s operating profit dropped 27.2% YoY to ₦2.49 billion, reflecting margin compression and lower operating leverage. The negative swing in bottom-line performance — a loss before tax of ₦172.53 million, compared to a profit before tax of ₦2.11 billion in 2024 — underscores the severe impact of financing costs on profitability.

Key profitability trends:

• Gross Margin: 13.0% (vs. 16.4% in 9M 2024)
• Operating Margin: 8.4% (vs. 11.9% in 9M 2024)
• Net Margin: -1.1% (vs. 4.9% in 9M 2024)
• EBITDA Margin: 9.2% (vs. 12.2% in 9M 2024)

The company’s earnings per share (EPS) fell to ₦(10.88) from ₦47 kobo in the prior period, indicating a sharp erosion in shareholder value.

Statement of Financial Position Overview (as at 30 September 2025)

₦’000 2025 2024 % Δ YoY

Total Assets 17,579,691 23,386,042 -24.8%

Total Equity 3,058,130 3,384,670 -9.6%

Total Liabilities 14,521,562 20,001,372 -27.4%

Debt-to-Equity Ratio 4.75x 5.91x imroved

Current Ratio 1.09x 1.07x Stable

Interpretation: Livestock Feeds’ balance sheet contracted by ₦5.81 billion (24.8%), reflecting the drawdown of inventories and repayment of certain liabilities. The Company maintained a relatively strong liquidity position, with current assets of ₦15.08 billion against current liabilities of ₦13.81 billion.

Total borrowings stood at ₦4.31 billion, down from ₦13.71 billion in 2024, following debt repayments and better cash flow management. However, the associated finance costs from existing facilities continued to pressure margins.

Equity declined 9.6% due to accumulated losses from the current period, although capital adequacy remains strong relative to peers in the feed milling industry.

Cash and Liquidity Position

• Cash and cash equivalents declined to ₦686.3 million (from ₦1.19 billion in 2024), reflecting weaker operating cash flow and debt servicing obligations.
• Inventory optimization efforts reduced stock levels by 32.8% YoY to ₦12.98 billion, freeing up working capital.
• Receivables improved significantly, rising to ₦1.20 billion from ₦152.6 million, likely due to extended credit terms granted to distributors.

While liquidity levels remain adequate, the company must manage its credit exposure prudently amid volatile market conditions and tightening monetary policy.

Key Ratios

Ratio 9M 2025 9M 2024 Change

Gross Margin 13.0% 16.4% -3.4pp

Operating Margin 8.4% 11.9% -3.5pp

Net Margin -1.1% 4.9% -6.0pp

Debt-to-Equity 4.75x 5.91x Improved

Current Ratio 1.09x 1.07x +0.02x

Interest Coverage Ratio 0.94x 2.61x -1.67x

Interpretation:

• Profitability ratios weakened substantially due to higher input costs and interest expenses.
• Debt leverage remains high but improved slightly as borrowings reduced.
• Liquidity ratios show marginal stability, indicating short-term solvency remains manageable.

Strategic Insights

• Cost Management: The company is focusing on local raw material sourcing to mitigate foreign exchange and import cost pressures.
• Operational Efficiency: Initiatives such as improved plant utilization and route optimization are helping to contain overhead costs.
• Debt Optimization: Ongoing debt restructuring efforts aim to reduce finance costs and improve cash flows.
• Revenue Diversification: Expansion into complementary livestock nutrition segments (premixes and concentrates) could support topline recovery in 2026.

Strengths

• Strong brand equity and nationwide distribution network.
• Effective inventory control and cost management initiatives.
• Stable equity base despite challenging market conditions.

Weaknesses

• High exposure to volatile input prices (maize, soybeans).
• Rising finance costs eroding profitability.
• Weak market demand in the animal feed segment.
• Low foreign exchange liquidity affecting imports of critical inputs.

Outlook

The outlook for Q4 2025 remains cautious. The Company is expected to continue navigating elevated input costs, high interest rates, and subdued consumer spending. However, anticipated improvements in grain supply and stabilization of energy costs may provide modest margin relief. We expect Livestock Feeds to sustain its focus on operational efficiency and cost containment while exploring innovative feed formulations and pricing strategies to restore margins. A rebound in profitability could materialize in 2026 if input costs stabilize and financing pressures ease.

Analyst View

“Livestock Feeds Plc’s 2025 performance reflects a company under significant cost strain but still demonstrating resilience through prudent operational management and capital discipline. While profitability remains under pressure, the improving balance sheet and efficient cost structure provide a foundation for recovery once macroeconomic conditions improve.”

Conclusion

Livestock Feeds Plc’s financial performance in 9M 2025 underscores the challenges facing Nigeria’s feed manufacturing sector — from high input costs to tightening credit conditions. Nonetheless, the Company’s disciplined operational management, reduced leverage, and stable liquidity position signal strategic resilience. While near-term profitability is likely to remain subdued, Livestock Feeds’ focus on cost optimization, production efficiency, and debt restructuring positions it favorably for a medium-term recovery as market fundamentals gradually improve.