…As company’s losses pile on FX crunch
Nestle Nigeria’s revenue is expected to rise to N1.05 trillion this year on the back of a firm naira and sustained growth, a boost for a company whose losses have continued to pile up as a result of foreign exchange volatility.
However, there are indications that the Lagos-based food and beverages firm will report a loss again in the full year of 2024, according to a report by investment and research firm Cardinalstone.
“While we maintain our expectation of a net loss for full year 2024 (FY’24), we project a return to profitability in FY’25, supported by reduced foreign exchange volatility and continued revenue growth,” CardinalStone analysts said in a recent note.
The latest financial result on the Nigerian Exchange Group reveals that the firm’s loss deepened to N184.3 billion in the nine months of 2024 from N43.1 billion in the similar period of 2023 as FX losses pile.
“For the full year of 2025, we anticipate continued growth momentum, driven by increased volumes from capacity expansion, moderate price adjustments, and an expanded distribution network. As a result, we forecast full-year 2025 revenue to reach N1.05 trillion,” they said.
Corroborating this projection, Bolade Agboola, consumer goods analyst at ChapelHill Denham, said Nestle Nigeria is expected to report an after-tax loss again in the 2024 full-year report.
“Nestle Nigeria should make a loss in 2024 driven by FX loss,” she said, however noting that there is an expectation for the naira to be more stable in 2025.
“There is no expectation for Nestle Nigeria to have significant FX losses during the period but equity will remain negative.”
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Nestle Nigeria’s revenue grew to N665.3 billion in the nine months of 2024 from N396.6 billion driven majorly by the food segment which contributed 63.8 percent of total revenue while beverage contributed 36.2 percent.
The growth was fueled by price increases, volume expansion, and the positive market reception of new products such as Maggi Signature Jollof, Maggi Soya Chunks, Nido Milk and Soya, Milo 3-in-1, and Cerelac Rice.
Nestle Nigeria had invested N39.3 billion in capacity expansion and technological upgrades as of nine months of 2024 which significantly enhanced its production capabilities.
It is not all doom for the food and beverages company as its share price stands at N932.7 on Tuesday, an appreciation from N830 which it closed with at the beginning of the year. The firm’s market capitalisation also currently stands at 693.6 billion.
A further analysis of the company also shows that other prepayment, insurance prepaid top total prepayments in the nine months of 2024.
The total prepayments stood at N7.41 billion driven by other prepayments (N5.49 billion), Insurance prepaid (N1.13 billion), and rent prepaid(788.9 million).
Prepayments represent payments made in advance for expected future economic benefits and it is analysed into short and long-term assets based on the period covered by the prepayment.
Cash and cash equivalents which show the value of Nestle Nigeria’s assets that are cash or can be converted into cash immediately declined to N33.2 billion from N152.3 billion.
Sales of goods in the local market drive a majority of the company’s revenue as 99.3 percent was obtained from Nigeria while export sales contributed 0.7 percent.
Revenue from Nigeria stood at N660.6 billion while export sales amounted to N4.69 billion.
Cordros Securities analysts said in a statement that for the rest of 2024, they anticipate continued topline growth driven by price increases across Nestle Nigeria’s product categories, the launch of innovative and affordable products, and enhanced distribution reach which should boost volumes.
“On the higher costs, the company plans to reduce production costs through energy efficiency measures and by substituting imported inputs with local content. However, despite these efforts, we expect elevated cost pressures and foreign exchange losses already incurred to impact Nestle’s 2024 full-year earnings,” Cordros Securities analysts said.
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