Nestlé Nigeria’s half-year 2025 performance points to a remarkable turnaround in business operations, yet shareholders will need to wait longer before dividend payments resume.
The company reported N187.6 billion in cash flow from operations, a dramatic recovery compared with just N5.9 billion in FY 2024 and a negative N27.6 billion in H1 2024. Net income also rebounded strongly, with profit after tax rising to N50.6 billion, reversing the N177 billion loss recorded a year earlier.
Cash Flow vs. Profitability
While Nestlé’s strong liquidity profile underlines the resilience of its business model, its profitability track record over recent years shows deep challenges. Between 2020 and 2024, the company generated N214 billion in cumulative operating cash flow, with only one negative year in 2022 (–N4.4 billion). However, during the same period, Nestlé recorded a combined post-tax loss of N115.9 billion, largely driven by severe foreign exchange losses. The most damaging year was 2024, when FX-related charges of N291 billion pushed the company into a N165 billion net loss.
Despite these setbacks, Nestlé has historically been known as a reliable dividend-paying company. For instance, in 2022, it declared N36.50 per share in dividends. But as things stand, dividends cannot resume until accumulated losses are cleared and shareholder equity returns to positive territory.
Prospects for Dividend Restoration
The latest financials suggest that the wait for dividends may not be indefinite. Accumulated losses fell from N243 billion at the end of 2024 to N193 billion by June 2025. Shareholders’ equity, while still negative, improved to –N41.7 billion, cutting the deficit by more than half within six months.
If the current earnings trajectory holds, annual profit for 2025 could reach N100–110 billion, positioning Nestlé to restore retained earnings by 2026 or 2027, assuming currency volatility remains under control. However, further exchange-rate shocks or slower-than-expected profit growth could delay this recovery timeline.
Balance Sheet Challenges
Nestlé’s leverage remains a concern. The company’s debt-to-assets ratio of 64% highlights the extent to which operations are funded through borrowings. However, operational strength is helping to ease debt pressures: interest coverage improved to 2.82x in H1 2025, up from just 1.16x in H1 2024, meaning operating profits now comfortably cover financing costs.
Still, rebuilding equity and reducing leverage remain top priorities. With borrowings at N579.2 billion, the balance sheet requires strengthening to ensure sustainable growth.
Market Confidence and Capital Options
Interestingly, despite the negative equity position, investor sentiment toward Nestlé remains highly optimistic. Its share price has soared 114% year-to-date, driving market capitalization to N1.48 trillion, well above its N899.7 billion in assets. This valuation premium reflects investor confidence in Nestlé’s brand strength and cash-generation capacity.
The buoyant market environment presents an opportunity for Nestlé to accelerate its recovery. A capital raise—whether through a rights issue or strategic placement could quickly restore shareholders’ funds, ease the debt burden, and fast-track the company’s return to dividend payments.
The Road Ahead
Nestlé Nigeria’s recovery is unmistakable: cash flows are surging, profitability has returned, and market confidence is high. Yet the balance sheet continues to show significant weaknesses, including negative equity, high leverage, and lingering accumulated losses.
The company faces two strategic choices—rely solely on steady profits to rebuild equity over the next two to three years, or capitalize on today’s favorable market sentiment to raise fresh funds and shorten the timeline to dividend restoration.
For shareholders, the outcome will depend on which path Nestlé ultimately chooses.
