Nestle Nigeria records 328% loss after tax in nine-month period

Loss after tax for Nestle Nigeria for the nine-month period between January and September 2024 jumped by 328 per cent higher compared with what it was a year ago.

Its newly released third quarter report shows 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.

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 company 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.

Its 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.