Economy
Nestle Nigeria Posts N104bn Loss In 2023, Shareholders Funds Wiped Out
Nestle will also not be able to pay dividends based on the status of its shareholder’s funds.
Nestle Nigeria Plc has lost a staggering N104 billion before tax for the year ended 2023 compared to a profit before tax of N71 billion same period in 2022.
Nairametrics reported that this is according to the 2023 financial statement of the company published on the NGX on Wednesday, 28th February 2024.
The report added that the company reported a foreign exchange loss of N195 billion which was the major reason for the overall loss reported by the company.
The forex losses also resulted in a wipeout of the company’s shareholder funds which is now a negative N78 billion from N30.2 billion a year earlier.
This means the company’s liabilities now exceed its assets.
Nestle will also not be able to pay dividends based on the status of its shareholder’s funds.
Breakdown of the result:
Revenue for the year is N547.1 billion up from N446.8 billion reported a year earlier
Gross profit N217.7 billion versus N155.7 billion (2022), +39.8% YoY
Operating Profit N123.7 billion versus N87.4 billion (2022), +41.5% YoY
Net Finance Cost -N227.8 billion versus N16.3 billion (2022), +1,297%
Pre-tax loss of N104 billion versus Pre-tax profit of N71.1 billion (2022).
Loss after tax of N79.4 billion versus Profit after tax of N48.9 billion (2022).
Shareholder Funds -N78 billion versus last year’s N30.2 billion.
Interest-bearing loans of N402.2 billion versus N155.2 billion (2022)
According to records seen by Nairametrics, Nestle has drawn down about $362.25 million in foreign currency loans. The loans were obtained from its parent company Nestle SA.
The company acknowledged the effect of the losses on its going concern status stating as follows
“The Company made a net loss of N79 billion (2022: net profit N49 billion) for the year ended 31 December 2023 and as at that date, its total liabilities exceeded its total assets by N78 billion (2022: net asset N30 billion).”
“Despite the strong operational performance, the net profit is impacted by significant devaluation of the naira. The company believes that as macroeconomic situation stabilizes, the same would yield positive impact to the overall economy as well as company results.”
“The company has taken robust margin management and cost management initiatives to address significant forex volatility and cost inflation.”
“In 2023, the company’s revenue grew by 22.4%, an increase of ₦100billion and the operating profit increased by 41.2%.”
The negative shareholder funds incurred by Nestle will most likely lead to a fresh raise of capital. This is to ensure the going concern status of the company is guaranteed.
Nestle will most likely raise capital over N100 billion to ensure it continues to operate effectively.
Meanwhile, the net cash flow of the company remained positive at N49 billion despite the negative shareholder funds.
Nestle also stated that during the year it invested N61 billion in the expansion of its lines at the three factories located in Agbara, Sagamu, and Abaji.
They also invested in the enhancement of our distribution center (DC) operations at Sagamu, Ogun State.
Amidst the economic challenges it also launched 5 new products and ventured into affordable plant-based nutrition through NIDO Soya.
Economy
FG services foreign debt with $3.5bn
The Federal Government spent $3.58 billion servicing its foreign debt in the first nine months of 2024, representing a 39.77 per cent increase from the $2.56bn spent during the same period in 2023.
This is according to data from the Central Bank of Nigeria on international payment statistics.
The significant rise in external debt service payments shows the mounting pressure on Nigeria’s fiscal balance amid ongoing economic challenges.
Data from CBN’s international payment statistics reveal that the highest monthly debt servicing payment in 2024 occurred in May, amounting to $854.37m.
In comparison, the highest monthly expenditure in 2023 was $641.70m, recorded in July. The sharp contrast in May’s figures between the two years ($854.37m in 2024 versus $221.05m in 2023) highlights the rising cost of debt obligations, as Nigeria battles massive devaluation of the naira.
The CBN showed significant month-on-month changes in debt servicing costs, with some months recording sharp increases compared to the previous year. A breakdown of the data revealed varied trends across the nine months.
In January 2024, debt servicing costs surged by 398.89 per cent, rising to $560.52m from $112.35m in January 2023. February, however, saw a slight decline of 1.84 per cent, with payments reducing from $288.54m in 2023 to $283.22m in 2024.
March recorded a 31.04 per cent drop in payments, falling to $276.17m from $400.47m in the same period last year. April saw a significant rise of 131.77 per cent, with $215.20m paid in 2024 compared to $92.85m in 2023.
The highest debt servicing payment occurred in May 2024, when $854.37m was spent, reflecting a 286.52 per cent increase compared to $221.05m in May 2023. June, on the other hand, saw a 6.51 per cent decline, with $50.82m paid in 2024, down from $54.36m in 2023.
July 2024 recorded a 15.48 per cent reduction, with payments dropping to $542.50m from $641.70m in July 2023. In August, there was another decline of 9.69 per cent, as $279.95m was paid compared to $309.96m in 2023. However, September 2024 saw a 17.49 per cent increase, with payments rising to $515.81m from $439.06m in the same month last year.
The data raises concerns about the growing pressure of Nigeria’s foreign debt obligations, with rising global interest rates and exchange rate fluctuations contributing to higher costs.
The global credit ratings agency, Fitch, recently projected Nigeria’s external debt servicing will rise to $5.2bn next year.
This is despite the current administration’s insistence on focusing more on domestic borrowings from the capital market.
It also estimated that approximately 30 per cent of Nigeria’s external reserves are constituted by foreign exchange bank swaps.
Regarding external debt, the agency said external financing obligation
The Federal Government spent $3.58 billion servicing its foreign debt in the first nine months of 2024, representing a 39.77 per cent increase from the $2.56bn spent during the same period in 2023.
This is according to data from the Central Bank of Nigeria on international payment statistics.
The significant rise in external debt service payments shows the mounting pressure on Nigeria’s fiscal balance amid ongoing economic challenges.
Data from CBN’s international payment statistics reveal that the highest monthly debt servicing payment in 2024 occurred in May, amounting to $854.37m.
In comparison, the highest monthly expenditure in 2023 was $641.70m, recorded in July. The sharp contrast in May’s figures between the two years ($854.37m in 2024 versus $221.05m in 2023) highlights the rising cost of debt obligations, as Nigeria battles massive devaluation of the naira.
The CBN showed significant month-on-month changes in debt servicing costs, with some months recording sharp increases compared to the previous year. A breakdown of the data revealed varied trends across the nine months.
In January 2024, debt servicing costs surged by 398.89 per cent, rising to $560.52m from $112.35m in January 2023. February, however, saw a slight decline of 1.84 per cent, with payments reducing from $288.54m in 2023 to $283.22m in 2024.
March recorded a 31.04 per cent drop in payments, falling to $276.17m from $400.47m in the same period last year. April saw a significant rise of 131.77 per cent, with $215.20m paid in 2024 compared to $92.85m in 2023.
The highest debt servicing payment occurred in May 2024, when $854.37m was spent, reflecting a 286.52 per cent increase compared to $221.05m in May 2023. June, on the other hand, saw a 6.51 per cent decline, with $50.82m paid in 2024, down from $54.36m in 2023.
July 2024 recorded a 15.48 per cent reduction, with payments dropping to $542.50m from $641.70m in July 2023. In August, there was another decline of 9.69 per cent, as $279.95m was paid compared to $309.96m in 2023. However, September 2024 saw a 17.49 per cent increase, with payments rising to $515.81m from $439.06m in the same month last year.
The data raises concerns about the growing pressure of Nigeria’s foreign debt obligations, with rising global interest rates and exchange rate fluctuations contributing to higher costs.
The global credit ratings agency, Fitch, recently projected Nigeria’s external debt servicing will rise to $5.2bn next year.
This is despite the current administration’s insistence on focusing more on domestic borrowings from the capital market.
It also estimated that approximately 30 per cent of Nigeria’s external reserves are constituted by foreign exchange bank swaps.
Regarding external debt, the agency said external financing obligations through a combination of multilateral lending, syndicated loans, and potentially commercial borrowing will raise the servicing from $4.8bn in 2024 to $5.2bn in 2025.
The anticipated servicing includes $2.9bn of amortisations, including a $1.1bn Eurobond repayment due in November.
The Small and Medium Enterprises Development Agency and economists have stated that the rise in Nigeria’s public debt might create macroeconomic challenges, especially if the debt service burden continues to grow.
The Chief Executive Officer of the Centre for the Promotion of Public Enterprises, Dr Muda Yusuf, explained that the situation could lead to a vicious circle, warning that “we don’t end up in a debt trap.”
He said, “I think there is a need for us to be very conscious of and watch the rate of growth of our public debt. Because it could create macro-economic challenges especially if the burden of debt service continues to grow.”
He maintained that there is a need for the government to reduce the exposure to foreign debts because the number has grown so due to the exchange rate.s through a combination of multilateral lending, syndicated loans, and potentially commercial borrowing will raise the servicing from $4.8bn in 2024 to $5.2bn in 2025.
The anticipated servicing includes $2.9bn of amortisations, including a $1.1bn Eurobond repayment due in November.
The Small and Medium Enterprises Development Agency and economists have stated that the rise in Nigeria’s public debt might create macroeconomic challenges, especially if the debt service burden continues to grow.
The Chief Executive Officer of the Centre for the Promotion of Public Enterprises, Dr Muda Yusuf, explained that the situation could lead to a vicious circle, warning that “we don’t end up in a debt trap.”
He said, “I think there is a need for us to be very conscious of and watch the rate of growth of our public debt. Because it could create macro-economic challenges especially if the burden of debt service continues to grow.”
He maintained that there is a need for the government to reduce the exposure to foreign debts because the number has grown so due to the exchange rate.
Economy
Oil imports drop by $1.52bn in Q2/24 – says CBN
Nigeria’s oil importation dropped to $2.79bn from $4.31bn in Q2 of 2024. This amounts to $1.52bn decline or a 35 per cent decline.
This development was contained in the Central Bank of Nigeria’s quarterly economic report for the second quarter of 2024 released recently.
This reduction highlights shifting dynamics in the nation’s oil and gas sector amid ongoing structural and economic adjustments following the removal of fuel subsidies under the administration of President Bola Tinubu.
The report also noted that the overall value of merchandise imports contracted, falling by 20.59 per cent to $8.64bn from $10.88bn recorded in Q1 2024.
The sharp decline in oil imports contributed significantly to this trend, the report noted.
The report reads: “Merchandise import decreased in Q2 2024, following the decline in the import of petroleum products. Merchandise imports decreased by 20.59 per cent to $8.64bn, from $10.88bn in Q12024.
“Analysis by composition indicated that oil imports decreased to $2.79bn, from $4.31bn in the preceding quarter.
“Non-oil imports also declined to $5.85bn, from $6.57bn in the previous quarter. A breakdown of total import showed that non-oil imports accounted for 67.72 per cent, while oil imports constituted the balance.”
Economy
Naira slumps against dollar to end on negative note
The Naira depreciated against the dollar on Friday at the foreign exchange market to end the week on a negative note.
FMDQ data showed that the weakened to N1678.87 per dollar on Friday from the N1639.50 exchange rate on Thursday.
This represents a N39.37 depreciation against the dollar compared to N1678.87 exchanged on Thursday.
Meanwhile, at the parallel market, the naira gained N10 to exchange at N1740 per dollar on Friday compared to N1750 recorded the previous day.
The development comes as Foreign Exchange transactions turnover surged astronomically to $1403.76 million on Friday from $244.96 million on Thursday, according to FMDQ data.
DAILY POST reports that in the week under review, the naira recorded mixed sentiments of gains and losses.
This showed Naira had continued to experience fluatuations in the FX marketers despite the Central Bank of Nigeria interventions.
Recall that on Wednesday, CBN authorised commercial, merchant, and non-interest banks in the country to manage tradeable foreign currencies deposited in domiciliary accounts established through the new Foreign Currency Disclosure, Deposit, Repatriation, and Investment Scheme.
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