Zedcrest: Improved FX stability drives consumer giants Q1'25 profit

Consumer goods stocks in Nigeria have seen significant gains in the first quarter of 2025, thanks to foreign exchange gains and relative stability in the Nigerian FX market. Analysts at Zedcrest have highlighted the strong performance of key players such as Boafood, Nestle, Unilever, and Nigerian Breweries. Adeyemi Adenuga, Investment Research Analyst at Zedcrest, discussed the first quarter numbers and expectations for the half-year numbers in a recent CNBC Africa interview. The performance of consumer goods companies in the Nigerian equity market has shown improvement in 2025. Revenue growth across different tickers averaged around 55%, with Boafood experiencing a 25% revenue growth in Q1. Cost of sales margins have also improved, with Boafood's margin increasing from 69% to 64% as the company focused on scaling up its production capacity. Additionally, companies like Boafood have benefited from FX gains, with Boafood recording a $358 billion gain compared to a $158 billion loss in Q1 2024. Overall, most companies in the consumer goods sector reported profits in Q1 2025, with Boafood's profits increasing by 124%. The operating environment remains challenging for these companies, but common trends such as stable FX rates and cost optimization strategies have helped drive profitability. Companies have reduced their FX-related obligations and streamlined costs to improve productivity. Pricing strategies have also played a crucial role in revenue growth, with price increases compensating for lower volumes due to consumer purchasing power issues caused by inflation in 2024. Boafood's expansion plans have focused on increasing production capacity, with investments in pasta and wheat milling plants. These efforts are expected to reduce production costs and improve profitability through economies of scale. The company's strategy aims to introduce new products to the market and enhance cost-saving mechanisms. Looking ahead, the industry is optimistic about a potential recovery in consumer purchasing power and an increase in sales volumes compared to the previous year. Nestle, another key player in the sector, is set to face further analysis in future discussions, as Zedcrest continues to monitor the market and provide insights on the evolving landscape of consumer goods in Nigeria.