Nestlé Nigeria Plc has staged a remarkable recovery in H1 2025, reversing the prior year’s losses with impressive revenue and profit growth. A combination of robust top-line performance, margin expansion, and efficient cost control drove a swing from a ₦252.5 billion pre-tax loss in H1 2024 to an ₦88.4 billion profit in H1 2025. The company’s fundamentals remain solid, backed by strong brand equity, resilient demand for consumer staples, and operational improvements despite inflationary and FX headwinds.

Key Strengths

Revenue Growth: H1 2025 revenue surged 43% YoY to ₦581.1 billion, driven by price increases and strong demand for core product categories (beverages and food).
Operational Efficiency: Operating profit doubled (+107%) to ₦130.4 billion, indicating successful cost containment, supply chain optimization, and improved margin management.
Return to Profitability: The company posted ₦50.6 billion in net profit, a sharp rebound from a ₦176.9 billion loss in H1 2024, restoring investor confidence.
Brand Strength & Distribution: Nestlé continues to benefit from its wide product reach, loyalty, and nationwide distribution network, which buffers against competition.

Key Weaknesses

FX Volatility Risk: Nestlé has significant exposure to currency depreciation, which in 2024 led to massive unrealized FX losses on foreign currency obligations.
Cost Pressures: Input costs, logistics expenses, and energy inflation remain elevated, and further naira devaluation could compress margins again.
Dividend Uncertainty: Although profitability has resumed, sustained earnings will be crucial before resuming or growing dividend payouts at pre-2023 levels.

Catalysts

Stable FX Environment: Stabilization of the naira will significantly reduce FX-related losses and enhance predictability of earnings.
Cost Optimization Strategy: Continued localization of raw materials and production could lower import-related costs.
Macroeconomic Tailwinds: Improved consumer spending and population growth favor long-term demand for packaged foods and beverages.

Assumptions

Revenue Growth: 15–20% annual revenue CAGR over the next 5 years driven by pricing and volume growth.
Profit Recovery: FY 2025 net profit could exceed ₦90 billion if H2 maintains momentum.
Valuation Multiple: With earnings recovery, P/E could normalize to 25–30x (historically high for Nestlé due to brand strength and dividend history).

Valuation Outlook

Short Term (1–2 Years): Share price could re-rate higher if Nestlé sustains profitability and pays dividends in FY25.
Medium Term (3–5 Years): EPS recovery to pre-crisis levels could see a return to premium valuation multiples, potentially doubling current market value.
Long Term (5–10 Years): Nestlé remains a defensive stock with attractive long-term compounding potential due to consistent demand for its essential products.

Nestlé Nigeria Delivers Strong Rebound with Triple-Digit Profit Growth in H1 2025

Shared on05 Aug 25Fair value Increased 36%

Shared on30 Jul 25

Shared on05 Aug 25
Fair value Increased 36%