Analysts have described Nestlé Nigeria Plc’s fourth-quarter performance as a “macro story,” attributing its profitability to stabilizing macroeconomic conditions. This insight was shared during the “Drinks and Mics” podcast, featuring Ugo Obi-Chukwu (CEO of Nairametrics), Samson Esemuede (Zrosk Capital), Tunji Andrew (CEO of Awabah), and Arnold Dublin Green (Cordros Capital).
Macroeconomic Tailwinds Drive Profitability
Arnold Dublin Green of Cordros Capital highlighted the role of improved macroeconomic conditions in Nestlé’s Q4 2024 performance. “Nestlé is a macro story. Macros are turning around, inflation is no longer as sticky as it once was, and FX pressures are stabilizing on the naira,” he noted. These factors likely contributed to the company’s recovery, especially after the foreign exchange (FX) challenges that plagued Fast-Moving Consumer Goods (FMCG) companies in recent years.
Strong Q4 Performance Amid Challenges
Nestlé Nigeria reported a profit after tax of N19.6 billion in Q4 2024, a significant turnaround from the N36.4 billion loss recorded in Q4 2023. Revenue for the quarter surged by 95% year-over-year, reaching N293.5 billion, up from N150.5 billion in the same period the previous year.
For the full year ending December 31, 2024, Nestlé Nigeria faced a loss before tax of N221.5 billion, a 113% increase compared to 2023. However, annual revenue grew by 75% to N958.8 billion, driven primarily by domestic sales, which accounted for 99.3% of total revenue at N952.2 billion.
Cost Pressures and Margin Squeeze
Despite the impressive revenue growth, the cost of sales increased by 97.75% year-over-year to N652.460 billion, putting pressure on gross profit margins. This highlights the ongoing challenges Nestlé faces in managing input costs and maintaining profitability.
Need for Additional Funding
Samson Esemuede of Zrosk Capital pointed out that Nestlé Nigeria still needs to secure additional funding to strengthen its financial position. “Nestlé is that one company that needs to raise a bit of money. I believe retained earnings might remain negative for some time if no capital is raised,” he remarked.
CEO’s Perspective on Resilience and Recovery
Wassim Elhusseini, CEO of Nestlé Nigeria, acknowledged the economic challenges that impacted the company’s performance, particularly the elevated finance costs due to foreign exchange revaluation losses. However, he emphasized the resilience of Nestlé’s brands and teams.
“Our 2024 results exemplify the resilience of our brands and teams amidst a challenging business environment. The impressive 75.2% growth in revenue and a 35.6% increase in operating profit to N167.9 billion highlight our strong operational performance,” Elhusseini stated. He also highlighted the significance of the company’s return to profitability in Q4 2024, achieving a net profit of N19.7 billion and reversing the N36.4 billion loss reported in Q4 2023.
Looking Ahead: Key Priorities for 2025
As Nestlé Nigeria enters 2025, key priorities include reducing finance costs, strengthening liquidity, and sustaining revenue growth to ensure long-term profitability. The company’s ability to navigate macroeconomic challenges, secure additional funding, and optimize costs will be critical to its continued recovery and success.
Nestlé Nigeria’s Q4 2024 performance underscores the importance of macroeconomic stability in driving corporate profitability, while also highlighting the need for strategic financial management in a challenging operating environment.