Nestlé Faces Continued Difficulties with a Pre-Tax Deficit of N252.5 Billion in the First Half of 2024

Nestle Nigeria Plc reported a pre-tax loss of N252.5 billion in the 2024 half-year, a 265% year-on-year decline from the N69.1 billion pre-tax loss in H1 2023.

The company reported N407 billion in sales for the period, which is a 55% increase year over year from the N261.8 billion reported in H1 2023.

While its gross profit increased from N107 billion to N127.3 billion, a 19% year-over-year increase.

The company reported a net loss of N176.9 billion for the period, a 254% drop from the N49 billion net loss reported in H1 2023.

In contrast to the N118.5 billion reported in H1 2023, Nestle experienced a net foreign exchange loss of N263.7 billion during the 2024 half-year.

Key Differences Between H1 2024 and H1 2023

• Revenue: N407 billion, up 55% YoY
• Cost of sales: N279 billion, up 81% YoY
• Gross profit: N127.3 billion, up 19% YoY
• Operating expenses: N64.2 billion, up 38% YoY
• Operating profit: N63.1 billion, up 4% YoY
• Operating margin: 15%, down 8 percentage points YoY
• Net finance cost: N315.6 billion, up 143% YoY
• (Loss)/Profit before tax: (N252.3 billion), down 265% YoY
• (Loss)/Profit for the period: N176.9 billion, down 254% YoY
• Earnings per share: (N223.19), down 254% YoY
• Total assets: N869 billion, up 49% YTD

Nestle reported revenue of N223.5 billion for the second quarter of the year, up 67% year over year from N133.8 billion for the same period in 2023. In addition, the company’s loss before tax for the second quarter came in at N56.4 billion, up 40% from the N94 billion loss reported in the same quarter of 2023.

Its financial figures for the year’s second quarter showed a constant exchange rate. From the N132.4 billion reported in Q2 2023, the finance costs dropped to roughly N99.3 billion, a 25% year-over-year decline.

Nigeria was the source of the majority of Nestle Nigeria’s income. But the group’s export income was N2.9 billion, jumping 656% yearly from N377 million in H1 2023.   

The revaluation of the company’s property, plant, and equipment resulted in a N150 billion excess that propelled the 49% increase in the company’s assets in 2024.

Nestle has had negative equity since the end of the 2023 fiscal year; however, after the 2024 fiscal year, the negative equity had grown by 34%, from N78 billion at the end of FYE 2023 to N104.9 billion. Retained losses for the business decreased from N78.6 billion to N255.5 billion.

Nestle’s debt

In addition to the Naira’s devaluation-related net foreign exchange losses, the company was also impacted by the high-interest rate environment. Its interest expense rose from N14 billion in H1 2023 to N54.4 billion in H1 2024, a 290% year-over-year rise.  

With some of Nestle’s foreign exchange-denominated borrowings having a long maturation period, of its N263 billion net foreign exchange loss on financing, about N31.9 billion was realized and N231.8 billion was unrealized.

The company’s debt profile showed this unrealized loss, with loans and borrowing rising to N653.9 billion, a 62.5% increase from N402.3 billion as of FYE 2023.

Nestle had a loan profile of over N402.3 billion as of FYE 2023. But this year, in addition to repaying N77.3 billion, the corporation took out a N12.3 billion intercompany loan and a N57 billion fresh bank credit.

With an intercompany loan of $426.3 million, Nestle Nigeria has a net foreign exchange exposure of about $449 million. The corporation has a $402.5 million intercompany loan as of FYE 2023.