Anxiety over continued delisting as poor corporate performance lingers

•Investors decry Nestle’s N43b loss
•Urge govt to stabilise FX market, boost supply

Stockbrokers have warned that the country may witness mass delisting of manufacturing firms from the stock market and outright exit from the market if urgent steps are not taken to stabilise the foreign exchange (FX) market.

The operators, apparently irked by the N43 billion loss incurred by Nestle Nigeria Plc, urged the government to work out modalities that would help to improve the supply side of FX.

Nestle, in its third quarter (Q3) 2023 had joined the likes of Unilever, PZ Cussons, GlaxoSmithKline and other listed firms to incur huge losses largely due to the FX crisis.

Specifically, the food and beverage company giant posted a loss of N43 billion in its Q3 performance, against N40.15 billion profit achieved in the corresponding period in 2022.

The development was not cheery news on the trading floor of the Nigerian Exchange Limited (NGX) as fear spread that the company may join its peers in seeking delisting or even stop local manufacturing.

According to the stakeholders, if the current harsh reality of the economy is fast impacting high-capitalised stocks hitherto assumed to be immune from vagaries of the overwhelming challenges, the worst may be ahead for the industry, which is popular among retail low net-worth investors. President of NewDimension Shareholders Association of Nigeria, Patric Ajudua, described the development as “very unfortunate”.

According to him, the loss incurred by the company would ultimately cause a major setback that is capable of eroding shareholders’ funds and posing a challenge to dividend payment.

He stated that the country would find it difficult to attract new investment into the country, noting that no serious manufacturing firm would want to operate in an environment where the existing ones are recording huge losses and warming up for exit.

“This simply implies that shareholders’ funds would be eroded and it will make it difficult for them to pay dividends because the bottom line is already depleted. Government must wake up to its responsibility of creating a safe and conducive business environment. A situation where companies find it difficult to pay their foreign creditors for goods supplied in dollars with ground their operations.

“Also, a situation where investors find it difficult to repatriate returns of their investment in dollars will discourage investors and in this case, the only way out is to exit from the country. It will also not guarantee the coming of new investors no matter the level of foreign trips as it is impossible to bring out a fish to dry land and expect it to survive,” he said.

Head Equity, Planet Capital, Paul Uzum, said Nestle posted its first loss in decades while PZ Cussons, Unilever, Nigerian Breweries, Guinness and International Breweries have all performed woefully this year.

He pointed out that both local and international firms are currently finding it hard to cope with the tough economic environment in Nigeria.

“There is no dollar to import. Even when you manage to make a profit, there is no dollar to repatriate to your parent company, so it will not be surprising if more of such firms exit Nigeria in 2024 or perhaps relocate to other countries with more friendly economic conditions like South Africa,’ he said.

Recall that about seven firms listed on the exchange recorded huge FX losses in their half-year operations.

Airtel, MTN, Nigeria Breweries, Guinness Nigeria, Nestle Nigeria, Cadbury Nigeria Plc and Dangote Cement incurred N623.6 billion losses due to naira depreciation.