Currency headwinds dampen Nestle Nigeria’s 9-months profit
Nestle Nigeria Plc, said that recent devaluation of the Naira and subsequent revaluation of outstanding foreign loans had an adverse effect on its earnings for the 9-months ending 30 September.
The maker of Milo and Nescafe Coffee said it grew revenue nearly 20% in the 9-months YTD to N129bn, from N108bn; however, higher inflation and revaluation of foreign loans spiked cost of sales 29% to N78bn, from N60bn. But that wasn’t the only area of concern for the chocolate drink maker. Administrative expenses rose 25%, coupled with a 414% jump in net finance cost and a 40% hike in income tax to N5bn, from N3.6bn all weighed on the company’s earnings. Nestle Nigeria’s net profit fell 97% to N485m, from N17.2bn a year ago. The company’s problems worsened in the third quarter, with net finance cost skyrocketing 540% leading to a N51m loss.
In a released statement, Nestle Nigeria said:
“The revenue of the Company increased by 19.9% for the 9 month period which is a confirmation that our brands continue to enjoy strong patronage from consumers in spite of the inflationary pressures, weak purchasing power and the challenging operating environment.
“Although the gross profit increased by 8.2% for the same period, net profit has been adversely impacted by the revaluation of the foreign loans due to devaluation of the Naira. In addition, the increase in the company income tax as a result of the expiration of the pioneer status impacted the net profit for the period.
“The Board and Management remain fully committed to the long term potential of the business in Nigeria and will continue to take proactive steps and cost saving initiatives to minimize the impacts of current macroeconomic challenges,” the company said.