Naira Devaluation Drives Nestle Nigeria to N176.9 Billion Loss in H1 2024

Nestle Nigeria Plc has reported an after-tax loss of N176.9 billion for the first half of 2024 as the naira devaluation plunged profitability.

This represents a 254.51% increase in losses compared to the N49.9 billion recorded in the same period last year.

In a statement released alongside its financial results, Nestle Nigeria attributed the substantial loss to the revaluation of its foreign currency obligations.

“The devaluation of the naira led to the revaluation of our foreign currency obligations and had an adverse impact on the profit after tax, resulting in a net loss of N176.9 billion for the first half of the year,” the company said.

The financial analysis reveals that while the company’s cost of sales surged to N279.7 billion in H1 2024 from N154.4 billion in H1 2023, its half-year revenue also saw significant growth, rising to N406.9 billion from N261.8 billion.

Despite the financial setback, Nestle Nigeria highlighted a notable increase in sales, reflecting strong market demand and brand loyalty.

“The results from the first half of 2024 reflect a clear growth momentum despite continued challenges in the business environment. Particularly noteworthy is our second quarter performance with a 67 percent increase in sales year-on-year, underscoring the strength of our brands and the trust our consumers place in us,” said Wassim Elhusseini, CEO and Managing Director of Nestle Nigeria.

Elhusseini praised the company’s operational efficiencies and the dedication of its employees as key factors in navigating the challenging economic environment.

“Delivering these results has involved optimizing operational efficiencies and, more importantly, the hard work and dedication of our employees, who have been crucial to this success. We also appreciate the unwavering support of our business partners and shareholders.”

Despite the loss, Elhusseini expressed confidence in Nestle Nigeria’s ability to overcome current challenges and deliver long-term value to shareholders while positively contributing to communities.

“Our commitment to excellence and innovation will continue to guide us as we strive to meet and exceed the expectations of our stakeholders,” he added.

The financial challenges faced by Nestle Nigeria are mirrored in its quarterly sales performance.

Between April and June 2024, the company’s sales grew by 149.05% to N223.4 billion compared to N89.7 billion in the same period last year.

However, the naira’s devaluation led to a revaluation of foreign currency obligations, contributing to a net loss of N34.2 billion for the quarter, compared to N66.1 billion in Q2 2023.

Analysts at Cordros Securities highlighted that Nestle Nigeria’s topline performance remained strong in Q2 2024 but noted that increased costs offset the gains.

“For the rest of the year, we anticipate continued topline growth driven by price increases across product categories, the launch of innovative and affordable products, and enhanced distribution reach, which should boost volumes,” they forecasted.

The analysts also noted that the company plans to reduce production costs through energy efficiency measures and by substituting imported inputs with local content.

However, they cautioned that elevated cost pressures and foreign exchange losses already incurred are expected to impact Nestle’s full-year earnings.

Nestle Nigeria Plc, a publicly listed food and beverage company headquartered in Lagos, has a long-standing presence in the Nigerian market since its founding in 1961.

Majorly owned by a holding company based in Switzerland, it continues to navigate the complexities of the local and global economic landscape.