Nestle Nigeria Ends Q1 On Loss Margine As Net Assets Wipe Out In One Fell

Nestle Nigeria Ends Q1 On Loss Margine As Net Assets Wipe Out In One Fell Swoop

OpenLife Nigeria reports that Nestle Nigeria Plc reported a pre-tax loss of N86.5 billion in the second quarter of the year ended June 30, 2023.

The losses contributed to wiping our Q1 profits taking its half-year profits to N61.6 billion one of the worst performance in years.

Nestle Nigeria’s losses are mainly due to a forex loss of N123.7 billion which impacted its profits.

Key highlights for Q2 2023

 Revenue N123.79 billion +19.2%
 Gross profit N55.6 billion +50.6%
 Operating profit N32.1 billion +62.5%
 Finance cost N121.6 billion +2547%
 Pre-tax losses of N86.5 billion -644%
 Total debts N299.7 billion vs N172.7 billion (2023 Q1)
 Working capital N61.9 billion vs N97.9 billion (2023 Q1)
 Gross profit margin 41% vs 32.9% YoY
 Operating profit margin 24% vs 17.6%
 Retained earnings -N49 billion
 Net assets wiped out now -N48.6 billion

Insights

Nestle Nigeria’s result was mostly impacted by foreign exchange losses which printed at a whopping N123.7 billion during the quarter.
 The impact of the losses essentially wiped out Nestle’s retained earnings which could impact its ability to pay dividends this year if it is not able to address the issues.
 Its net assets are also wiped out in one fell swoop as a result of the forex losses. Nestle had a net asset of N46.4 billion as of the first quarter of the year
 Nestle has an intra-group loan of $454 million which may have contributed to the forex losses the company experienced.
 Nestle might at this rate either raise capital to close the negative equity or convert some of the loans to equity or expect succor from forex appreciation.