In the latest half year(H1) ended June 30, 2024 unaudited result and accounts, International Breweries Plc, Nigerian Breweries Plc, Cadbury Nigeria Plc and Nestle Nigeria Plc have reported another worst performance, attributable to foreign exchange loss and challenging business environment.
No respite for investors as rising costs of production shrink Fast-Moving Consumer Goods (FMCG) firms’ earnings in the period under review and it may affect shareholders return this year.
The effect of naira devaluation, rising inflation and interest rate hikes has continued to take a huge toll on the performance of firms under the FMCG, causing their financial cost to soar.
The four multinational companies declared a loss before tax of N532.98 billion in H1 2024 from N192.9billion loss declared in H1 2023.
The breakdown revealed that Nigerian Breweries announced N116.34billion loss before tax in H1 2024 from N67.84billion in H1 2023, while Nestle Nigeria declared N252.53billion loss before tax in H1 2024 from N69.12 billion in H1 2023.
International Breweries in its unaudited result and accounts declared N150.23billion loss before tax in H1 2024 from N41.43billion reported in H1 2023 as Cadbury Nigeria posted N13.88 billion loss before tax in H1 2024 from N14.53billion loss before tax in H1 2023.
Aside from the naira devaluation last year, there has been a sharp increase in the Monetary Policy Rate (MPR) since the beginning of the year 2023.
This has continued to erode the purchasing power of Nigerians, putting more pressure on the margins of FMCG companies and negatively impacting their bottom line.
However, due to rising costs and soaring interest rates, which have affected the cost of funds, the four companies incurred N533.75 billion in the net foreign exchange loss in H1 2024, for the operating year, representing a leap of 104 per cent YoY from N261.6 billion in H1 2023.
Operators said the rising interest rate and devaluation are the two major elements that are affecting FMCG companies as some of the companies had foreign currency-denominated loans in their books. The loans increased in naira value on the back of the depreciation of naira. This has resulted in the loss of position for many firms in the sector, making it difficult for most of them to pay a dividend.
