Market News

 By : Helen Oji

The relatively stable naira in the first quarter is beginning to produce measurable and positive outcomes for several firms operating within the fast-moving consumer goods (FMCG) sector as most of them achieved over 100 per cent profit in their Q1 operations.

For years, the firms contended with the severe consequences of a highly volatile exchange rate, which not only eroded their profit margins but also led to significant foreign exchange (FX) losses, distortions in input costing and increased pressure on their balance sheets.

The naira’s consistent depreciation in previous years was also triggered by fluctuating oil revenues, policy uncertainties and FX market illiquidity, leaving many corporate entities grappling with skyrocketing costs of imported raw materials, revaluation losses on foreign currency liabilities and the inability to plan on a long-term basis.

The volatile environment proved particularly challenging for FMCG companies with substantial exposure to imported inputs.

However, the recent improvement in exchange rate stability attributed to more coherent monetary policies, enhanced FX liquidity and growing investor confidence in economic reforms, is beginning to reflect on the financial health of the firms.

Their unaudited first-quarter (Q1) results for 2025 point to a welcome shift, with several companies recording a return to profitability, notable reductions in FX-related losses, and strong revenue growth.

For instance, Cadbury Nigeria Plc offers a notable case of this turnaround. The company reported a pre-tax profit of N8.5 billion in Q1 2025, reversing a pre-tax loss of N10.4 billion recorded in the same period last year.

The positive shift was driven by robust domestic sales and a 57.1 per cent year-on-year increase in revenue, which climbed from N23.6 billion to N37.2 billion.

Its gross profit also surged to N12.1 billion, representing an impressive 143.5 per cent increase from the N4.9 billion reported in Q1 2024. The performance suggests that improved local demand and greater pricing efficiency are now playing a vital role in restoring profitability.

Cadbury began the year with a share price of N21.5 has gained 48.4 per cent on that price valuation to close at N31.90 kobo last week Friday. The stock has accrued a 35 per cent gain over the past four years, emerging as the sixth-best company on the Nigerian Exchange Limited (NGX).

Similarly, Nestlé Nigeria Plc sustained its recovery trajectory, returning a pre-tax profit of N51.15 billion in Q1 2025. This stands in sharp contrast to the staggering N196.09 billion loss posted in the same period last year.

The company, which returned to profitability in the final quarter of 2024, has now shown further financial stability. Post-tax profit reached N30.18 billion, up by 121 per cent year-on-year.

More importantly, Nestlé’s finance costs were drastically reduced by 89.3 per cent to N23.47 billion, largely due to a sharp fall in FX-related expenses. The company’s net exchange losses dropped from N191.67 billion in Q1 2024 to just N163 million in Q1 2025, indicating that the stable exchange environment has significantly eased pressure on earnings. Analysts believe continued currency stability could gradually help rebuild the company’s financial base.

Nestle closed its last week’s trading day at N1,100, adding a 25.7 per cent gain from a share price of N875 at which it reopened for transaction on January 2, 2025.

NASCON Allied Industries Plc delivered one of the most impressive turnarounds in the quarter. The company reported a 515 per cent year-on-year surge in pre-tax profit to N11.31 billion, and post-tax profit rose by a similar margin to N7.58 billion, already accounting for nearly half of its total profit for 2024.

Its revenue also rose significantly by 77.21 per cent year-on-year to N41.85 billion. A key driver of this performance was a tremendous drop in FX losses, which declined from N3.06 billion in Q1 2024 to just N55.38 million in Q1 2025.

NASCON’s share price has increased by 59.5 per cent from N31.35 kobo recorded at the beginning of the year to N50.

Also, Dangote Sugar Refinery Plc revenue for the quarter climbed to N213.9 billion, reflecting a 74.3 per cent year-on-year increase. The company, while still in the red, posted a pre-tax loss of N22.63 billion, significantly reduced from the N106.86 billion loss recorded in Q1 2024.

This improvement was linked to a 77.2 per cent drop in finance costs, which fell to N27.5 billion. The progress highlights a pathway toward recovery, although full profitability may require sustained operational efficiency and further FX stability.

International Breweries Plc also made a dramatic leap into profitability, posting a pre-tax profit of N35.06 billion in Q1 2025, up from a loss of N89.3 billion a year earlier. The company benefitted from a surge in revenue and significantly lower FX losses, which dropped to N581.4 million from N80.5 billion in Q1 2024. Gross profit rose 106.7 per cent to N59.6 billion, while operating profit turned positive at N31.5 billion, marking a striking contrast to the losses recorded in the previous year.

International Breweries began the year with a share price of N5.55 and has added 44.1 per cent on that price valuation to close at N7.38 kobo.

Analysts affirmed that this newfound stability has helped companies better manage their cost structures, make more accurate forecasts, and allocate capital more efficiently. For many, it has also restored investor confidence, enabled strategic planning, and unlocked capacity for expansion.

The Q1 2025 performance is therefore not just a sign of relief, but a potential signal that the worst of the currency-induced pressure may be easing provided the current macroeconomic direction is sustained.

Research Analyst at Cowry Asset Management Limited, Charles Abuede said that the re-emergence of profitability among FMCG firms listed on the exchange reflects the strategic and FX risk management measures deployed to navigate the currency volatility that began in 2023.

According to him, the modest appreciation of the naira has had a notable impact on their financials, further amplified by inflation-driven price adjustments and volume growth.

“Looking ahead to 2025, we anticipate some relative stability in the FX market, which should further strengthen the bottom line of these companies,” he said.

President of New Dimension Shareholder Association of Nigeria, Patric Ajudua said the exchange rate stability played a key role in the sector’s recovery by enabling more effective financial planning.

He added that other contributing factors include debt-to-equity conversions, capital injections through rights issues, product price increases, business diversification, and improved cost control measures.

Indeed, these results indicate that the easing of currency volatility is beginning to provide room for Nigerian firms to breathe, recover margins, and chart a more stable growth path.

While challenges remain, including negative equity for some companies, the first-quarter results offer cautious optimism that the worst of the FX-induced earnings crisis may be over, provided macroeconomic conditions continue to improve.