Nestle Nigeria's Equity Turns Negative After it incurs a N195.07bn Foreign Exchange Loss

Nestle Nigeria Plc is not going to pay dividend as the consumer goods giant recorded a negative retained earnings due to a huge foreign exchange (FX) revaluation loss brought on by the devaluation of the currency.

Total liability of N659.80 billion as at December 2023 was higher than total assets of N581.77 billion, which resulted in negative shareholders’ funds of N78.03 billion, according to MoneyCentral calculations.

The negative retained earnings was largely driven by a N195.07 billion foreign exchange loss that is also responsible for a loss after tax of N79.47 billion as at December 2023.

Consumer goods firms have been booking foreign exchange losses since last year when the Naira started a sharp depreciation as a result of the unification of the exchange rate.

It is important to note the exceptional loss that wiped out gains from increased sales combined with rising input costs have forced brewers to embark on another price hike to stay afloat.

In January 2024, the headline inflation rate increased to 29.9o percent relative to the December 2023 headline inflation rate which was 28.92 percent.

The consumer goods giant has been benefitting from upward adjustments in its food beverage segments, backed by robust brand loyalty which has been strengthening sales.

Analysts at Meristem Securities s predict that NESTLE will face a less severe foreign exchange impact on their profits compared to the previous year.

“Consequently, we project their bottom line to strengthen to NGN37.47bn in 2024FY from the previous year’s loss.,” said analysts at Meristem Securities.