Consumer goods giants spend N75 of every N100 earned as costs bite

Nigeria's six leading listed consumer goods companies spent N1.55 trillion to generate N2.09 trillion in revenue in the first half of 2026. That means costs consumed about N75 out of every N100 earned, underlining the persistent cost pressures facing the country's largest manufacturers.

A review of the H1 2026 financial statements of BUA Foods, Nestlé Nigeria, Dangote Sugar Refinery, Unilever Nigeria, NASCON Allied Industries and Cadbury Nigeria shows combined revenue fell by 3.9% from N2.18 trillion in H1 2025. Rising distribution, administrative, financing, energy and logistics expenses continued to weigh on operations.

Cost breakdown

The six companies recorded combined identifiable operating costs of N1.55 trillion, equivalent to 74.1% of total revenue. Cost of sales declined by 13.85% to N1.26 trillion from N1.46 trillion in H1 2025, largely due to lower raw sugar input costs at BUA Foods and Dangote Sugar.

Combined selling, distribution and administrative expenses rose by 13.9% to N236.4 billion from about N207.6 billion. Net finance costs fell by 45% to N57.9 billion from approximately N105.3 billion, reflecting debt repayments and Nestlé Nigeria's foreign exchange translation gain.

Cost of sales accounted for more than 81% of total identified costs. Despite the revenue decline, combined weighted average gross margin improved to 39.9% from 35% in the same period of 2025.

Sugar companies drag revenue

The revenue decline was concentrated mainly on BUA Foods and Dangote Sugar, whose earnings are closely tied to sugar commodity prices. Together, the two companies lost N185.7 billion in revenue compared with H1 2025.

BUA Foods' revenue declined by 16.2% to N765.1 billion, though its cost of sales fell faster, giving it the lowest cost-to-revenue ratio of 59.1%. Dangote Sugar recorded N391.9 billion in revenue, down 8.9%, while its 91.7% cost ratio remained the highest among the companies.

Excluding the two sugar-focused companies, Nestlé, Cadbury, NASCON and Unilever grew combined revenue by 13.3%. Unilever recorded the fastest growth of 22.2%, followed by Nestlé at 12%, Cadbury at 7.9% and NASCON at 3.8%.

The performance suggests the overall revenue decline was driven more by normalisation of sugar prices and foreign exchange pass-through effects than by a broad-based slowdown in consumer demand.

Expert views

Dr Muda Yusuf, Chief Executive Officer of the Centre for the Promotion of Private Enterprise, said manufacturers still face deep structural challenges despite recent improvements in macroeconomic stability.

Investment banker and stockbroker Tajudeen Olayinka noted that companies were absorbing some cost increases because weak consumer purchasing power limited further price increases. Olayinka is a senior dealing member of the Nigerian Exchange and CEO of Wyoming Capital Partners Limited.

“The major cost components weighing on their earnings are distribution and selling expenses, administrative costs, finance costs and energy costs,” said Olayinka. “Production is energy-intensive and logistics-intensive. On top of that, manufacturers are contending with very high financing costs.”

“Companies are passing some of the costs to consumers, but certainly not all of them. They cannot fully transfer these costs because consumers’ purchasing power is weak.”

Dr Yusuf, former Director General of the Lagos Chamber of Commerce and Industry, advised: “Government should significantly expand the development finance window. Relying solely on commercial financing is not sustainable for the real sector.”

The analysts also called for greater investment in rail transport infrastructure to reduce reliance on road transportation, diesel-powered trucks and expensive logistics networks.

What it means

The results show that revenue growth alone does not guarantee stronger profitability when distribution, administrative and financing costs rise faster. Cadbury increased revenue by 7.9%, but its selling and distribution costs more than doubled to N10.8 billion. Its cost-to-revenue ratio worsened to 85.6%, making it the only company whose ratio deteriorated year-on-year.

Dangote Sugar's N554.9 billion net debt position generated N47.5 billion in finance costs during the period. NASCON and Unilever earned a combined N11.8 billion in finance income, which helped cushion operating costs.

Cost-to-revenue ratios ranged from BUA Foods' 59.1% to Dangote Sugar's 91.7%, reflecting differences in production structures, financing positions and distribution requirements. Companies with net cash positions, including NASCON and Unilever, benefit from interest income. Heavily indebted firms, particularly Dangote Sugar and Nestlé, remain exposed to elevated finance charges.

With operating costs still consuming nearly three-quarters of combined revenue, the ability to control financing, distribution, energy and logistics expenses will remain critical to the competitiveness of Nigeria's consumer goods sector.