Mounting Losses Swallow Nestle Nigeria’s N39bn Q1 Profit

The N39 billion after-tax profit of Nestle Nigeria in the first quarter quickly vanished into a massive pile of accumulated losses, and the equity gap is still large enough to wipe out the company’s earnings for at least the next two interim periods.

Last year, the food and beverages company faced the same misfortune, with its entire N105 billion profit swallowed up by previous losses.

Nestle Nigeria Plc is now in its second year of recovering profits after two tough years of massive losses totalling N244 billion by the end of 2024, which wiped out over N92 billion from shareholders’ funds.

The company’s interim financial report for the first quarter ending in March 2026 shows that accumulated losses, which had fallen to about N113 billion by the end of 2025, have dropped further to around N74 billion by the end of March.

Current and future profits will need to be set aside to clear past losses and rebuild the retained earnings account before shareholders can expect dividends again. This effort will likely take up a significant portion of this year’s earnings, and Nestlé Nigeria probably won’t see meaningful profit retention until the final quarter.

The company is expected to stay profitable throughout the year, as foreign exchange losses that caused previous setbacks have been out of the picture for the second year in a row.

The first-quarter profit of N39 billion marks a modest 4.3 per cent increase from last year, highlighting the hurdles of driving sales amid tough competition and consumer pushback on prices.

Growth in sales slowed in the first quarter at 10.6 per cent year-on-year to N326 billion compared to a 26 per cent increase in turnover for the preceding financial year.

Sales growth is expected to improve this year, but keeping costs in check while maintaining income and securing a decent margin to boost profits will be a challenge for management.

Production cost isn’t leaving any room for cost savings, as it grew slightly ahead of sales revenue at 10.8 per cent year-on-year to N194 billion. Gross profit therefore improved by 10.3 per cent to close at N132 billion at the end of the first quarter, showing a marginal decline in gross margin.

Operating activities added to the pressure from production, as other income declined while operating expenses grew.

The main pressure point is marketing and distribution expenses that rose by over 26 percent year-on-year to N44 billion, claiming an increased share of gross profit from 29 percent to 33.3 percent.

Administrative expenses also grew by 17 percent to almost N13 billion during the period, which eroded margins further. Operating profit only edged up by 1.7 percent to close at N75.4 billion for the first quarter.

The strength to improve the bottom line by 4.3 percent came from financial activities where finance income multiplied more than 32 times year-on-year to over N15 billion and finance cost dropped by 28 percent to less than N17 billion.

The result is a slash of net finance cost from N23 billion to N1.7 billion over the review period.

Interest bearing loans and borrowings have been cut from about N476 billion at the end of last year but remains huge in the region of N447 billion by the end of the first quarter.

The cost saving from finance expenses powered pre-tax profit, which rose by over 44 percent year-on-year to N73.8 billion by the first quarter close.

An increase in income tax expense from less than N21 billion to N34.8 billion over the period lowered the rate of increase in after tax profit to 4.3 percent against the 44 percent rise in pre-tax profit.

Nestle Nigeria closed the first quarter trading with earnings per share of N49.20 against N38.07 per share in the same period in 2025.

The company closed the 2025 financial year with earnings per share of N132.42 but has not been able to pay any dividends to shareholders since 2022.