FX Loss, Rising Costs Drag down FMCG Firms’ Loss to N533 Billion in H1 2024

Kayode Tokede

There appears to be no respite for companies under the Fast-Moving Consumer Goods (FMCG) as four of them declared N533 billion loss before tax in the half year (H1) ended June 30, 2024, over the effect of naira devaluation, double-digit inflation rate and Central Bank of Nigeria’s (CBN) increase in its Monetary Policy Rate (MPR).

These companies had reported a N192.8 billion loss before tax in H1 2023.
The four FMCG companies are Nigerian Breweries Plc, Cadbury Nigeria Plc, Nestle Nigeria Plc, and International Breweries Plc.
The H1 2024 results showed that Nestle Nigeria, followed by Nigerian Breweries declared the highest loss before tax.
Nestle Nigeria declared a N252.53 billion loss before tax in H1 2024 from N69.12 billion in H1 2023, while Nigerian Breweries announced a N116.34 billion loss before tax in H1 2024 from N67.84billion in H1 2023.

In addition, International Breweries, in its unaudited result and accounts, declared N150.23billion loss before tax in H1 2024 from N41.43billion reported in H1 2023 just as Cadbury Nigeria posted a N13.88 billion loss before tax in H1 2024 from a N14.53 billion loss before tax in H1 2023.
In the period under review, the inflation rate increased to 34.19 per cent from 22.79 per cent in June 2023, while the naira against the dollar stood at N1,470.191 from N770.38 in June 2023.

Also, the MPR was 26.25 per cent on June 30, 2024, from 18.50 per cent as the Central Bank of Nigeria (CBN) tackled the rising inflation rate and unstable naira at the foreign exchange market.
Operators said the rising interest rate and devaluation were the two major elements affecting FMCG companies as some of the companies had foreign currency-denominated loans in their books.

The loans increased in naira value on the back of the depreciation of naira.
This resulted in the loss of position for many firms in the sector, making it difficult for most of them to pay a dividend.
The four companies, according to THISDAY checks, reported a N533.75 billion net foreign exchange loss in H1 2024, about 98 per cent from the N269.8 billion reported in H1 2023.

The Company Secretary, NB, Uaboi Agbebaku in a signed statement said: “The company continues to navigate the challenging operating environment characterised by soaring inflation, exchange rate volatility, security challenges, elevated input costs, and the rising cost of living. Despite these headwinds, the company has demonstrated resilience and is on the path to recovery in its operations. Revenue grew by 73 per cent in the half year compared to the same period in 2023.

“The growth was driven by strategic pricing, innovation, volume, and market recovery. Gross Profit grew by 42 per cent, although lower than the rate of growth in Revenue, due to a 93 per cent increase in the Cost of Goods Sold driven by currency devaluation and inflation.
“Through our cost-saving and other efficiency initiatives, we recorded a 34 per cent increase in Operating Profit, again signalling the resilience and strength of our operations. However, largely due to Foreign Exchange (FX) losses arising from the devaluation of the naira, and high-interest expenses resulting from the increasing lending rates, the Loss for the Period went up by 79 per cent.

“To restore sustainable growth and profitability, and enhance operational and financial stability, the Company is in the process of raising N600 billion additional capital through a rights issue. The funds raised will be used to eliminate our foreign exchange-denominated debts and reduce our local debts thereby mitigating the company’s exposure to the continuing economic challenges.”

Also, the CEO/MD of Nestlé Nigeria, Mr. Wassim Elhusseini in a statement, said, “We are confident in our ability to navigate the current challenges to deliver long-term value to our shareholders while contributing positively to our communities. Our commitment to excellence and innovation will continue to guide us as we strive to meet   and exceed the expectations of our stakeholders.”