N195bn FX loss wipes off Nestlé Nigeria’s capital base — first in years

Nestlé Nigeria Plc rolled in a net loss of N79 billion from the 2023 operations, as huge net foreign exchange (FX) losses of N195 billion wiped off the company’s capital base and dug a hole of N78 billion in the balance sheet.

It is the first loss the company has seen in many years, which is a deep plunge from the peak profit figure of almost N49 billion it registered in 2022.

The audited financial report of the food and beverages producing company for the full year ended December 2023 shows that FX losses multiplied 23 times in the year and derailed the course of stable growth in operating activities.

Further pressure mounted from interest expenses on the company’s enlarged borrowings. Finance expenses tripled to N38.4 billion at the end of the year.

Interest-bearing debts jumped more than two and half times from N155.3 billion in 2022 to N402.3 billion at the end of 2023.

The company’s retained earnings of N29.8 billion at the beginning of the year seemingly evaporated and in its place has towered a retained deficit of N78.6 billion at the end of 2023.

The development has emptied the company’s equity vaults of N30.3 billion and left negative shareholders’ funds in excess of N78 billion.

Nestle Nigeria’s operating activities maintained stable growth during the year but the foreign exchange losses prevented improved operating results from getting down to the bottom line.

Sales revenue grew by 22.5 percent to N547.1 billion at the end of the 2023 operations, which means additional earnings of N100.3 billion was raked in in the year.

The gain in sales is reinforced by a slowdown in production cost — which grew by 13.4 percent to N329.9 billion compared to the 22.5 percent growth in turnover.

Cost saving from input expenses spurred an increase of 39.4 percent in gross profit in the year to N217.2 billion.

Marketing and distribution expenses grew by 28.7 percent to N73.8 billion, claiming a moderately increased share of sales revenue. The same is true of administrative cost that rose by 83.6 percent in the year to N20.1 billion.

The cost increases were diluted by a net write-back of financial assets impairment of N483.2 million – which advanced from a net charge of N29 million in the preceding year.

The results from operating activities were, therefore, upturned by 41.5 percent to close the year at N123.8 billion. A further boost was gained from finance income, which grew by 19 percent to N5.7 billion at the end of the year.

That, however, is the end of the good news in the earnings story of Nestle Nigeria in 2023.

Finance cost, driven by FX losses, multiplied 11 times to N233.5 billion, consuming operating profit and finance income and creating a pre-tax loss of N104 billion at the end of the year, down from a pre-tax profit of N87.5 billion in 2022.

An income tax credit of N24.6 billion came quite handy to management to lower the company’s net loss figure to N79.5 billion for Nestle Nigeria at the end of 2023.