Nestle Loses N104b Due to Naira Devaluation 

Nestle Nigeria Plc has revealed a loss before tax of N104 billion for the fiscal year 2023, a sharp contrast to the N71 billion profit recorded in 2022.

In the 2023 financial statement published on the NGX on February 28, 2024, Nestle Nigeria disclosed that a foreign exchange loss of N195 billion was the primary factor behind the substantial overall loss. This downturn led to a depletion of the company’s shareholder funds, plummeting from N30.2 billion to a negative N78 billion.

The company is currently in a predicament where its liabilities exceed its assets, making it unable to pay dividends based on the current status of its shareholder funds.

Despite a noteworthy revenue increase to N547.1 billion and positive trends in gross and operating profits, the surge in net finance cost at -N227.8 billion contributed to the pre-tax loss of N104 billion. This setback was attributed to the devaluation of the naira.

Acknowledging the impact on its growing concern status, Nestle Nigeria expressed optimism for a turnaround as the macroeconomic situation stabilises. The company said it had implemented robust margin and cost management initiatives to address forex volatility and cost inflation.

In response to the negative shareholder funds, Nestle Nigeria plans to raise over N100 billion in capital to secure its going concern status. Despite economic challenges, the company remains cash flow positive, reporting a net cash flow of N49 billion.

Nestle Nigeria has invested N61 billion to expand its factory lines, enhance distribution centre operations, and introduce five new products, including affordable plant-based nutrition through NIDO Soya.

Commenting on the results, Wassim Elhusseini, Managing Director and CEO of Nestlé Nigeria Plc, said:

“The devaluation of the Nigerian Naira in 2023, which led to a revaluation of our foreign currency obligations, undoubtedly impacted our financing cost and consequently the profit after tax. However, we remain optimistic of our capacity to overcome the current economic difficulties and emerge stronger.”

Elhusseini further stated,

“Looking ahead, we remain dedicated to our purpose of unlocking the power of food through responsible local sourcing and confection of the high-quality, nutritious food and beverages that families across Nigeria prefer. We also remain steadfast in optimising our operations to ensure the availability and accessibility of affordable and nutritious products to our consumers in anticipation of a timely turnaround in the business environment”.

Nestle’s situation parallels PZ Cussons, which also grappled with financial setbacks attributed mainly to foreign exchange losses and the devaluation of the naira.

In early February, the multinational company PZ Cussons reported an £88.2 million foreign exchange loss due to the devaluation of the Nigerian naira. CEO Jonathan Myers highlighted the significant impact of the naira’s unprecedented 70% depreciation in 2023 on the company’s financial performance, emphasising despite efforts to manage economic volatility, Myers anticipates further challenges in the FY24 results due to recent additional devaluation.

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