Huge Loss Damages Nestle Nigeria Earnings, Equity Capital
Nestle Nigeria Plc’s earnings performance was damaged by a significant increase in foreign exchange losses in the first half of 2024; the company’s unaudited financial statement for the period showed.
The consumer goods company recorded a net loss of N176.91 billion in the first half of the year, driven by foreign exchange losses emanated from its foreign currency liabilities totaling N263.71 billion.
The consumer player is currently struggling to survive as zero capital would have given the management a better chance to source for additional capital.
At the moment, Nestle Nigeria total liabilities has exceeded its total asset, which could potentially results to management inability to meet short term obligations when relevant suppliers make the calls.
Net loss was N49.98 billion in the first half of 2023, according to the result. The sustained increase in accumulated losses has wiped off the company’s shareholders fund.
In the period, Nestle Nigerian revenue climbed by 55.5% year on year to N406.97 billion from N261.77 billion in the first half of 2023. The significant topline growth in the first half was propelled by an increase in domestic and export sales.
Similarly, the company’s cost of sales grew by +81.1% year on year due to a surge in the cost of raw materials, purchased finished goods, and consumables.
The company’s cost of sales grew faster than its revenue to settle at N279.6 billion from N154.4 billion in H1 2023, leading to a gross profit of N127.3 billion, an increase of 18.6% from N107.3 billion in H1 2023.
Unaudited financials for the period revealed that gross margin declined to 31.3% from 41.0% in the comparable period in 2023. Amidst inflation pressure, operating expenses increased during the period by 38.0% year on year, driven by higher marketing and administrative expenses.
The company’s total operating expense increased by 38.1% to N64.2 billion in H1 2024 from N46.5 billion in H1 2023. Nestle reported a decrease in impairment on financial assets to N9.7 million in H1 2024, down from N37 million in H1 2023.
The figure in its unaudited financials revealed that operating profit margin slumped to 15.5% from 23.2% 12 months earlier. It was noted that finance income dropped by 67.9% year on year to N2.51 billion.
On the other hand, finance expenses jumped significantly by 131.0% to N318.11 billion, owing to continued volatility in the foreign exchange market. The sharp rise in finance expense eroded profitability, resulting in a loss before tax of N252.53 billion in H1 2024, compared to a loss of N69.12 billion in H1 2023.
Meanwhile, the company recorded a tax credit of N75.61 billion from the reversal of temporary differences on deferred taxes, thereby bringing profit after tax to negative balance of N176.91 billion.
Its unaudited numbers showed that the consumer goods company’s shareholders’ fund further declined to a negative N104.86 billion from N78.63 billion, due to significant negative retained earnings. # US Dollar Mixed Ahead Consumer Confidence Data
