Nestle Nigeria’s nine-month loss surges fourfold to N184 billion

The financial distress of Nestle Nigeria deteriorated in the first nine months of the year compared to the same period of 2023.

Details of its newly released earning report for nine months showed that the company continued to be at the mercy of a foreign exchange volatility that hurt profit and has left its balance sheet battered for more than a year now.

Loss after tax for the Nigerian operation of the world’s largest food company Nestle S.A from January through September jumped 328 per cent higher than a year ago.

That happened after the net exchange loss it incurred on converting its foreign currency debt obligation into naira, its base currency, more than doubled to N285.3 billion.

Foreign currency-denominated borrowings constitute more than half of Nestle Nigeria’s liabilities.

And that has been a major concern for its finances, given that it earns the bulk of its revenue in naira which needs to be converted into dollar and other currencies to service the debt.

The company’s dollar obligations leapt in naira terms during the period as monetary authorities in Nigeria executed a one-off devaluation of the local currency in January, while a limited supply of the greenback further weakened the naira.

Revenue for the maker of Milo, Golden Morn and Maggi climbed 67.8 per cent to N685.3 billion in the period under review.

Cost of sales roughly doubled to N459 billion on the back of a dramatic increase in raw material spending. Nestle Nigeria relies considerably on imports for its raw materials sourcing, making it vulnerable to foreign exchange exposure in its supply chain.

But its attention is shifting inwards. The food giant is turning to domestic suppliers for turmeric and is replacing imported corn starch with local cassava starch, according to Reuters, cutting back its need for foreign exchange.

But, like every other consumer goods manufacturer, it is facing another bugbear locally in the form of inflation, which even monetary authorities have not been able to tame for months on end.

Price levels decelerated for the first time in 19 months in July but resurged two months after, a pain point for FMCGs like Nestle Nigeria, whose marketing and distribution expenses climbed to N73.4 billion from N58.9 billion within the review period.

Loss after tax accelerated to N184.3 billon from N43.1 billion a year ago. The company’s negative equity, which stood at N73.1 billion at the end of last year, increased to N112.1 billion.

Its due debt and payables to trade partners went up by 7.4 per cent to N211.8 billion, pushing its current liabilities to N277.3 billion.

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Nestle Nigeria did not answer PREMIUM TIMES email inquiry last month requesting the company’s plan to settle its trade and payables of N178.1 billion as of June.

The stock has shed 19.6 per cent of its value so far this year.