Banking Business And Entrepreneurship

Nestle Nigeria In Big Loss In Exchange Rate As Naira Depreciate

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Nestle Nigeria In Big Loss In Exchange Rate As Naira Depreciate

Nestle Nigeria Plc released its 2016 results showing revenues rose 20% to N181.9 billion (2015: N151.2 billion). Profit after tax however declined by 67% to N7.9 billion (2015: N23.7 billion).

Nestle blamed the drop-in profits on the impact of forex devaluation after the company incurred a N20.8 billion interest expense. Foreign exchange loss made up about N16.3 billion of this loss.

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Nestle currently has a total external borrowing of about N50.5 billion with about N3.9 billion denominated in Naira. The rest are loans owed to its related parties and include interest expenses ranging from Libor+2.7% to Libor+7.6%.

Foreign currency translation of the dollar loans required that they take an exchange rate loss of about N16.3 billion. Nestle also reported a significant increase in raw material cost jumping from N57.4 billion in 2015 to N75.4 billion in 2016.

The CBN in June 2016, devalued the naira after it introduced the Flexible Exchange Rate Policy. This depreciated the naira from about N197 to N315 at the interbank forcing companies that took foreign denominated loans to take a foreign exchange loss.

Nestle Nigeria share price has lost about 26% this year alone and closed at a one year N570. It is currently up 5% one hour into trading on Monday.

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