Three firms lose N140 billion to naira devaluation

Three companies under the Fast-Moving Consumer Goods (FMCG) – BUA Foods, Flourmills and Cadbury Nigeria – have incurred over N140 billion due to last year’s naira depreciation.

Cadbury Plc suffered foreign exchange (FX) loss of N36.93 billion while BUA Foods incurred a loss of N73.56 billion. For Flourmills, its FX loss surged by 208 per cent to N31.48 billion within the period.

Cadbury Nigeria reported a loss of N27.63 billion representing a significant decline of 2,228 per cent from the N1.3 billion pre-tax profit recorded in 2022, despite its impressive revenue of N80.38 billion in 2023, a 46 per cent increase from the N55.21 billion posted in 2022.

With an operating profit of N8.41 billion in 2023, the company recorded a net finance cost of N36.03 billion, leading to a loss before tax of N27.63 billion.

While its interest expense on borrowings appreciated by 170 per cent to hit N1.36 billion from N503 million in 2022, it was impacted by the N36.93 billion cost accrued due to FX differences in 2023.

Recall that Cadbury recorded a massive loss before tax of N17.9 billion in the second quarter of 2023, compared to the N800 million profit achieved in the same period in 2022 due to N20.9 billion write down the company borrowed as a result of the unification of FX rates.

Operators have expressed fear about the extent to which the harsh reality of the economy is fast impacting the sector assumed to be immune to the vagaries of the overwhelming challenges.

They warned that the trend, if not urgently addressed, could wipe off the assets of companies with dollar-denominated loans shortly, especially companies that are not liquid.

Hence, the President of the Independent Shareholders Association of Nigeria, Moses Igbrude, urged listed firms to embrace backward integration fully and source their raw materials locally to minimise the impact of the FX crisis on their operations.

“For the short term, I will advocate for balance sheet restructuring through the right issues where they convert the loan to equity, they should exploit backward integration by sourcing their raw materials locally and develop a good export strategy to earn foreign exchange,” he said.
Head Equity, Planet Capital, Paul Uzum, said these companies’ woes have further been compounded by the persistent naira devaluation.
“Now that the dollar to naira has been further devalued to N1,430, the companies’ woes have compounded. Their losses in 2024 will be almost double what happened in 2023.
“This affected several companies like Nestle, Flourmill, Dangsugar, Cadbury, International Breweries, Guinness, Nigerian Breweries and some few illiquid banks like Unity Bank,” he said.

Vice President of Highcap Securities, David Adonri, said: “Since the naira is still depreciating, any importer with long-term foreign currency obligations may suffer further exchange rate loss.”