Zedcrest: Nestlé revenue growth expected to reach ₦1.18 trn in FY’25

Nestlé, the food and drink processing conglomerate, is expected to see a moderate 24 percent year-on-year revenue growth to reach 1.18 trillion naira in 2025, according to analysts at Zedcrest. This growth is anticipated to be driven by steady consumer spending and minimal price adjustments. Despite facing challenges such as a significant loss after tax in 2024 due to a 60 percent devaluation in foreign exchange rates, Nestlé is expected to benefit from a more stable foreign exchange environment going forward. In a recent interview with CNBC Africa, Adeyemi Adenuga, Investment Research Analyst at Zedcrest, highlighted key points from Nestlé's performance in 2024 and shared insights on the company's outlook for 2025. One significant aspect of Nestlé's performance in 2024 was the improvement in contributions and exports, particularly to other Sub-Saharan African countries like Ghana, Ivory Coast, and others. These sales in other markets positively influenced the revenue growth for the company. However, despite the revenue growth, Nestlé reported a loss after tax of approximately 180 billion due to the adverse effects of the foreign exchange devaluation on the business. The finance cost soared to about 200 billion, impacting the company's bottom line. Adenuga also pointed out that Nestlé saw an improvement in operating cost margins, which declined to 14.5 percent from 17.2 percent. He expressed optimism that Nestlé would continue efforts to reduce costs in 2025, particularly in operating expenses by exploring alternative power sources for their plants. Moreover, for the fourth quarter of 2024, Nestlé experienced an FX gain of 183 billion naira due to currency appreciation, providing a positive outlook for the company. Looking ahead to 2025, Zedcrest projects Nestlé to report a profit after tax of around 30 billion, driven by improvements in the foreign exchange market and government initiatives to reduce crude oil imports, which would ease the demand for foreign exchange and support Nestlé's profitability. Adenuga recommended that Nestlé take corporate actions to restore equity and investor confidence, such as rights issues or debt-to-equity deals. Regarding the broader consumer goods sector, Adenuga highlighted that FX exposure has been a major challenge for companies in the sector. However, with the relative stability in the foreign exchange markets and initiatives like backward integration to reduce FX exposure, companies are expected to perform better in 2025, as finance costs decrease. In terms of price increases, Adenuga noted that there would likely be slight price adjustments across the sector, as companies aim to remain competitive without significantly raising prices due to already high price levels and intense market competition. In conclusion, while challenges like foreign exchange fluctuations have impacted Nestlé's performance in the past, analysts remain optimistic about the company's growth in 2025 and expect the broader consumer goods sector to show signs of recovery with improved stability in the FX market and strategic cost management.