Accumulated Losses Gulp Nestle Nigeria’s ₦65bn Profit

Accumulated losses from two years of heavy setbacks have consumed Nestle Nigeria’s entire profit of nearly ₦65 billion for the half-year ended June 2026, leaving the company with a retained deficit exceeding ₦48 billion.

This marks the second consecutive year that the food and beverages giant has used all its earnings—after sacrificing approximately ₦105 billion in 2025—to patch a gaping hole in its equity base.

Much of the profit expected from the third quarter is also likely to be absorbed in erasing the retained deficit, which stood at over ₦243 billion at the close of 2024.

However, if the current momentum persists, Nestle Nigeria could return to positive retained earnings by Q3 and potentially end the year with a surplus of about ₦80 billion.

Half-Year Performance: Revenue Growth and FX Windfall

The interim financial report shows that half-year profit growth was powered by rising sales revenue and a substantial foreign exchange windfall, which sharply reduced net finance cost. Cost and income dynamics have stabilised: revenue improved by 12 per cent year-on-year to approximately ₦651 billion, although this represents a slowdown from the 26 per cent growth posted in 2025.

Cross-border sales drove revenue growth in Ivory Coast and Ghana, but sales dried up in Burkina Faso and Cameroon. Nonetheless, domestic sales still accounted for 98.5 per cent of turnover.

Production cost rose by 10 per cent to ₦392 billion, increasing at a slower pace than revenue and thus reducing the average unit cost. This delivered a gain in gross margin from 38.7 per cent to 39.7 per cent, with gross profit rising 15 per cent to ₦258.5 billion.

However, much of the gross profit gain was offset by a 27 per cent year-on-year increase in selling and distribution expenses, driven by energy costs, which climbed to ₦93.5 billion. Operating profit consequently improved at a slower rate, up 8.5 per cent to ₦141 billion.

Finance Operations and Debt Overhang

The standout feature of Nestle’s earnings was a surge in finance income, driven by net foreign exchange gains exceeding ₦32 billion—multiplied nearly 30-fold to more than ₦33 billion for the period. These gains more than compensated for higher finance expenses, slashing net finance cost from ₦42 billion to ₦14.6 billion.

Despite some debt reduction, Nestle Nigeria still carries interest-bearing liabilities of ₦445 billion, incurring nearly ₦48 billion in interest expenses over six months.

Without the foreign exchange windfall, net finance costs would have consumed a third of operating profit, resulting in only moderate profit growth. Instead, a sharp drop in net finance expenses powered a 43.4 per cent increase in pre-tax profit to ₦126.8 billion, while after-tax profit rose 28 per cent to ₦64.8 billion. Earnings per share climbed to ₦81.72, up from ₦63.80 for the same period last year.

Looking ahead, three critical factors will shape Nestle Nigeria’s second-half performance:

• Whether selling and distribution expenses will moderate;
• If the foreign exchange windfall can be sustained;
• The ongoing impact of high and growing finance costs on the company’s bottom line.

While the company’s performance shows encouraging signs of recovery, sustained discipline in cost control and further improvement in financing structure will be essential for a full return to positive retained earnings and a stronger equity position by year-end.