Naira Devaluation: Notore, Nigerian Breweries, Four Others Report N296.14bn Loss in Q3 2023

Kayode Tokede

A total of six companies, Notore Chemical Industries Plc, Nestle Nigeria Plc, Nigerian Breweries Plc, International Breweries Plc, Dangote Sugar Refinery Plc and Cadbury Nigeria Plc have declared a sum of N296.14billion loss before tax in third quarter (Q3) of 2023 as against N113.98billion profit before tax reported in third quarter of 2022.

The loss before tax reported by the six companies is coming on the backdrop of exchange rate unification, high cost of operation and significant hike in cost of borrowing from banks.

Macro economic challenges such as inflation rate that moved to 26.72per cent as of September 2023 from 20.77 per cent September 2022 and deprecation of Naira at the foreign exchange market to N768.76 /Dollar as at September 2023 from N432.37/Dollar September 2022 negatively affected these companies’ performance in the period under review.

Major global economies remain fragile Post COVID-19 pandemic and the nine months of 2023 saw a slew of Central Bank of Nigeria (CBN) interest rate hikes as the Monetary Policy Committee (MPC) adopted monetary tightening measures amidst heightened inflationary pressures.

The Central Bank of Nigeria (CBN) recently announced changes to the operations in the Nigerian Foreign Exchange (FX) Market, including the abolishment of segmentation, with all segments now collapsing into the Investors and Exporters (I&E) window and the reintroduction of the ‘Willing Buyer, Willing Seller’model at the I&E window.

Since then, the local currency has depreciated significantly, leading to high cost of goods and services. 

THISDAY investigation showed that Nigerian Breweries declared N78.16billion loss before tax in Q3 2023 from N19.09billion profit before tax in Q3 2022, while Nestle Nigeria reported N56.66billion loss before tax in Q3 2023 from N58.39billion profit before tax in Q3 2022.

Notore Chemical Industries recorded N66.24billion loss before tax in Q3 2023 from N949.6million reported in Q3 2022.

Key factors that contributed to Notore Chemical Industries   recent worst performance include: 61.4 per cent drop in revenue from contracts with customers to N12.7 billion in Q3 2023 from N32.95 billion in Q3 2022, while net finance cost increased to N51.53 billion in Q3 2023, an increase of 296.2 per cent from N13.01billion reported in Q3 2022. 

Cadbury Nigeria declared N10.24billion loss before tax in Q3 2023 from N4.02billion profit before tax in Q3 2022 as

In addition, International Breweries reported N43.52billion loss before tax in Q3 2023 from N2.85billion in Q3 2022, while Dangote Sugar Refinery declared N41.33billion loss before tax in Q3 2023 from N36.27billion loss before tax reported in Q3 2022.

For International Breweries, N36.18billion impairment charge on financial assets in Q3 2023 from N3.73billion in Q3 2022 impacted on the company’s overall performance.  

THISDAY gathered that Nigerian Breweries reported N86.83billion net loss on foreign exchange transactions in Q3 2023 from N10.36billion in Q3 2023.

Nestle Nigeria also declared N127.46billion net exchange loss on translation of foreign currency denominated balances in Q3 2023 from N1.69billion in Q3 2022, while Cadbury Nigeria reported N20.69billion unrealized exchange difference in Q3 2023.

Also, Dangote Sugar Refinery reported N90.99billion exchange loss in the ordinary course of business in Q3 2023 from N14.33billion reported in Q3 2022.

Nigerian Breweries in a statement said, “Overall, volumes declined in the period under review due to continued high pressure on disposable income and the socio-political challenges in various parts of the country. However, flavoured beer volume increased led by Desperados.

“Revenue increased by a low-single digit percentage driven by pricing to mitigate inflation. The operating profit was impacted by the lower volumes, higher input costs influenced by inflation and devaluation of the naira, and a one-off restructuring cost. Pricing and significant cost savings initiatives were not enough to fully mitigate rising input costs. A combination of foreign exchange losses due to the devaluation of the naira and higher interest costs resulted in a net loss during the period.”

Meanwhile, as manufacturing companies are posting losses, Nigerian banks have continued to benefit significantly from the unification of the foreign exchange. 

Responding, the Chief Executive Officer, Highcap Securities Limited, Mr. David Adnori said banks were the major buyer and seller of foreign exchange when the CBN suspended BDC operators access to foreign exchange

According to him, “Most Nigerian banks have excess foreign exchange currency and when the CBN unified the market in early June, automatically their savings appreciated and it resulted in extraordinary foreign exchange gain so far this year.

“At the end of the deal is the manufacturer who buys foreign exchange to import raw materials for production, among other things. A lot of them have   arrangements with their parent companies to supply foreign exchange. The unification of foreign exchange by CBN crystallized in disfavour of the manufacturing companies and that was why most of them declared losses in H1 2023.”

The Chief operating officer of InvestData Consulting Limited, Mr. Ambrose Omordion said Nigerian banks in the past warehouse excess foreign exchange at the old price, stressing that the unification of Naira significantly impacted on the foreign exchange revaluation gain in the period under review.