Nestle Nigeria’s financial struggles deepened in 2024, with the company reporting a staggering 328% year-on-year increase in net loss, reaching N184 billion for the first nine months of the year, up from N43.068 billion in the same period in 2023. According to Nestle Nigeria’s unaudited financial results, released recently, this drastic loss escalation was primarily driven by significant foreign exchange losses totaling N285.29 billion.
Despite the challenging financial landscape, the company’s revenue surged by 67.8% year-on-year, climbing to N665.29 billion from N396.592 billion in 2023. This impressive growth was fueled by a 66.8% rise in domestic sales and an extraordinary 861.7% increase in export revenue. Analysts attribute this revenue increase to a combination of volume growth, price adjustments, and successful new product launches, such as Maggi Signature Jollof, Maggi Soya Chunks, Nido Milk and Soya, Milo 3-in-1, and Cerelac Rice.
However, soaring operational costs dampened the company’s profitability. The cost of sales rose by a substantial 94.1% to N458.978 billion from N236.421 billion in the comparable period in 2023, attributed to inflationary pressures that pushed raw material costs higher. Nestle’s gross profit for the period reached N206.312 billion, a 28.8% increase from the previous year’s N160.171 billion, but its gross profit margin dropped from 40.4% to 31.0%, reflecting the heavy impact of rising costs.
Operating expenses also increased by 39.8%, mainly due to higher spending on marketing and administrative activities. While operating profit rose by 21% year-on-year to N110.844 billion from N91.586 billion, the operating profit margin declined to 16.7% from 23.1% in the prior year, with the entire gain offset by soaring finance costs.
Nestle Nigeria’s finance costs skyrocketed by 147.0% to N366.23 billion, compared to N148.24 billion in the same period last year. This surge was driven by a mix of factors, including a steep increase in net exchange losses on foreign currency translations, which rose from N127.46 billion in 2023 to N285.29 billion in 2024. Additionally, interest expenses climbed sharply by 188.5%, reaching N83.87 billion from N29.07 billion in the prior year due to the impact of currency devaluation on increased intercompany loans.
Amid these challenges, Nestle reported a significant unrealized exchange loss, increasing from N173.93 billion in 2023 to N251.59 billion in the first nine months of 2024. On a more positive note, the company benefited from a tax credit of N71.11 billion, resulting from the reversal of temporary differences in deferred taxes.
In total, Nestle Nigeria reported a negative Profit After Tax (PAT) of N184.27 billion for the nine-month period, marking one of the most challenging financial performances in the company’s recent history. The steep losses underscore the difficulties consumer goods companies face in managing exchange rate volatility and inflationary pressures in Nigeria’s economy.