Sharp Rise in Losses Due to Economic Pressures
Nestle Nigeria Plc reported a significant pre-tax loss of N255.38 billion for the first nine months of 2024, representing a 350% increase from last year’s N56.65 billion loss during the same period. This steep rise is primarily due to high finance costs and the volatility of Nigeria’s foreign exchange, which has created substantial challenges for the multinational food company.
Finance Costs and Currency Volatility Impact Profits
According to Nestle Nigeria’s unaudited financial statement, finance costs have surged by 136%, reaching N369.15 billion. The company’s net finance costs have risen by 147%, amounting to N366.22 billion, with foreign exchange losses alone accounting for N285.29 billion. The naira’s devaluation has intensified these losses, affecting foreign currency-denominated obligations, which now constitute over half of the company’s total liabilities.
Revenue Growth Strained by Rising Costs
Despite a 68% revenue growth to N665.28 billion, driven by a 66.8% boost in domestic sales and an 861.7% increase in exports, profitability remains heavily affected. Nestle Nigeria’s cost of sales nearly doubled, reaching N458.97 billion, and raw material expenses have surged by over 100%. These rising expenses have contributed to a post-tax loss of N184.27 billion, up 328% from last year’s N43.07 billion.
Efforts to Reduce Foreign Currency Dependence
To mitigate foreign currency risks, Nestle Nigeria has turned to local sourcing for some ingredients, such as turmeric and cassava starch, which reduces reliance on imports. However, ongoing inflation and high operational costs have limited the benefits of these adjustments, underscoring the persistent financial strain faced by the company.
Historical Context: Profit to Loss Turnaround
For the fiscal year 2023, Nestle Nigeria also reported a pre-tax loss of N104 billion, a stark contrast to the N71 billion profit recorded in 2022. In its financial statement released on February 28, 2024, the company attributed this downturn to a foreign exchange loss of N195 billion, significantly impacting shareholder equity, which fell from N30.2 billion to a negative N78 billion.
Sector-Wide Challenges from FX Pressures
The financial setbacks experienced by Nestle Nigeria highlight broader challenges within the corporate sector, where companies face mounting pressures from foreign exchange losses and inflation. Despite rising revenues and operational adjustments, the impact of currency fluctuations has led to considerable financial strain, which continues to affect many businesses across Nigeria.
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