Nestle Nigeria Generates Profit Through Core Operations Amid Currency Woes

The fundamentals of Nestle Nigeria Plc remain strong as the consumer goods giant generated profit through its core operations, but foreign exchange revaluation loss brought on by currency devaluation undermined earnings per share (EPS).

The largest beverage producer in Africa’s most populous nation saw operating profit spike by 41.17 percent to N91.58 billion as at September 2023, from N64.87 billion as at September 2022.

Operating profit margin increased to 23.09 percent in September 2023 from 19.46 percent the previous year.

Gross profit margin moved to 40.39 percent in the period under review from 35.17 percent the previous year.

The largest expansion in profit margins were recorded in 2019 when companies benefited from hikes in the price of key products because consumers had a little cash in their wallet.

The improvement in margins is attributed to a rapid growth in revenue and the acceptability of the company’s products by consumers.

Over the past four decades, Nestle Nigeria has a diversified product base that has been driving top line growth, which makes it withstand macroeconomic shocks.

Sales were up 18.92 percent to N396.59 billion in September 2023 from N33.37 billion the previous year.

However, Nestle Nigeria posted loss after tax of N43.06 billion, no thanks to an N127.57 billion foreign exchange revaluation loss as consumer goods firms are reeling from currency risk due to a weak Naira in the face of reforms by the new administration that seeks to stabilise the economy.

That led to a negative shareholders’ fund of N41.17 billion, and combined with total debt of N319.94 billion means the consumer good giant will need to raise capital to strengthen its balance sheet.

Just like its peer rivals, investors are buying shares in the company as the shares have lost 4.55 percent so far this year.