Honeywell Profit Dips N8.635bn in 9months

Despite reporting a revenue increase, Honeywell Flour Mills Plc, has posted a whopping N8.635 billion loss in exchange rate for its third quarter financial period, ended September 31st, 2023.

The company’s nine months’ unaudited financial report shown that it reported N8.635 billion in foreign exchange losses in the nine months as against N3.522 billion posted in 2022, accounting for 145 per cent increase in the loss.

Although, the company, reported a revenue of N79.444 billion for the nine months as against N76.495 billion in 2022, representing a 3.86 per cent increase.

However, due to the rising cost of sales which swallowed much of the earnings following rising inflation and high exchange rate, the company declared a loss in earnings, Honeywell Flour Mills posted a loss of N4.376 billion from a loss of N7.353 billion in 2022.

The Central Bank of Nigeria (CBN) announced changes in the Nigerian foreign exchange operations which required the immediate collapse of all segments of the market into the Investor & Exporter (I&E) foreign exchange window and reintroduced the ‘willing buyer, willing seller’ model.

The Naira has moved from N465 against the dollar at the end of May 2023 to close at N786.02/$1 at the official market on Wednesday 1st November, giving rise to a net exchange loss of these companies.

Some shareholders of quoted companies listed on the floor of the Nigerian Exchange Limited believe that the elevated Exchange rate will deny them expected dividends from the companies especially those that are exposed to foreign loans.

Shareholders, who spoke on the matter lamented the impacts of the free fall of the naira arising from the harmonization of exchange rates on the profitability of Nigerian companies with foreign loans.

An independent shareholder, Mr. Joeseph Bamidele, said Nigeria companies face low or no profits due to the rising exchange rate.

“This is because many Nigerian companies are exposed to foreign exchange risk, as they have to repay their loans in foreign currencies.

The rising exchange rate is hurting the profitability of Nigerian companies with foreign loans and that will also impact negatively on dividends to shareholders,” he said.

Bamidele noted that as the naira depreciates, the value of the companies’ foreign currency liabilities increases, while the value of their foreign currency assets decreases.

“This can lead to a decrease in the companies’ profits. Several Nigerian companies have already reported higher debt servicing costs and lower profits due to the rising exchange rate.

“The rising exchange rate is also making it more difficult for Nigerian companies to raise new foreign debt,” he said.