BREAKING: Nestle Nigeria reports N123.7 billion in forex losses, net assets wipes out in one fell swoop

Nestle Nigeria Plc reported a pre-tax loss of N86.5 billion in the second quarter of the year ended June 30, 2023.

The losses contributed to wiping our Q1 profits taking its half-year profits to N61.6 billion one of the worst performance in years.

Nestle Nigeria’s losses are mainly due to a forex loss of N123.7 billion which impacted its profits.

Key highlights for Q2 2023

  • Revenue N123.79 billion +19.2%
  • Gross profit N55.6 billion +50.6%
  • Operating profit N32.1 billion +62.5%
  • Finance cost N121.6 billion +2547%
  • Pre-tax losses of N86.5 billion -644%
  • Total debts N299.7 billion vs N172.7 billion (2023 Q1)
  • Working capital N61.9 billion vs N97.9 billion (2023 Q1)
  • Gross profit margin 41% vs 32.9% YoY
  • Operating profit margin 24% vs 17.6%
  • Retained earnings -N49 billion
  • Net assets wiped out now -N48.6 billion

Insights– Nestle Nigeria’s result was mostly impacted by foreign exchange losses which printed at a whopping N123.7 billion during the quarter.

  • The impact of the losses essentially wiped out Nestle’s retained earnings which could impact its ability to pay dividends this year if it is not able to address the issues.
  • Its net assets are also wiped out in one fell swoop as a result of the forex losses. Nestle had a net asset of N46.4 billion as of the first quarter of the year
  • Nestle has an intra-group loan of $454 million which may have contributed to the forex losses the company experienced.
  • Nestle might at this rate either raise capital to close the negative equity or convert some of the loans to equity or expect succor from forex appreciation.

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