As existing and prospective investors  continue to search for companies quoted on the floor of Nigerian Exchange Limited (NGX) that can guarantee returns in their investment, Nestle Nigeria Plc has continued to sustain investors’ hope amidst downturn in earnings, which was occasioned by tough economic operating terrain.

However, despite the resilience of Nestle operating performance, the company experienced a significant downturn in earnings, due to the substantial finance cost resulting from the impact of the naira devaluation.

A look at Nestle Nigeria second quarter unaudited financial performance for the period ended June 30, 2023, shows that revenue increased by 19.2%, which is above 17.7% that was recorded in the same period in 2022. The performance was supported by growth across the food and beverage business segment.

The food business was up by 28.3%, while the beverage business grew by 6.1%. Industry watchers are of the view that both pricing improvements and increased volumes drove the revenue during the period under consideration.

Remarkably, gross margin expanded to 41.6%, the highest since the second quarter of 2020, which was 41.3%. Consequently, EBIt and EBITDA margins improved significantly to 24.0% and 26.1%, respectively, amid a 16.6% decline in operating expenses.

Nonetheless, net finance costs were up by N118,66 billion in the period under review, which is above N3.89 billion that was recorded in the same period in 2022. The higher finance cost is attributed to the N123.77 billion net foreign exchange loss recorded in the period , reflecting the impact of the naira devaluation.

Consequently, the finance cost pressure triggered a pre tax loss of N86.22 billion against profit before tax of N15.89 billion that was recorded in the same period in 2022. Accordingly the company which produces Milo and different varieties of Maggi seasoning recorded a post tax loss of N58,69 billion against profit after tax of N9.77 billion in second quarter of 2022, with an income tax credit amounting to N27.83 billion.

Commenting on the results, Nestle Nigeria Plc, Managing Director / Chief Executive Officer,  Wassim Elhusseini,  said, “I thank every member of our team for the unwavering commitment and dedication which resulted in the significant increase in revenue and gross profit over half year 2022 despite the challenging business environment. Our profit after tax was, however, negatively impacted by the recent devaluation of the Naira, which necessitated the revaluation of our foreign currency obligations”.

He said going into the second half of 2023, “we will continue to focus on optimising our operations to ensure the availability and accessibility of the nutritious food and beverages our loyal customers expect from us.“

Meanwhile as shareholders await Nestle Nigeria Plc third quarter unaudited financial performance for the period ended September 30, 2023, there are concerns and low expectations among market operators and investors even ahead of the 2023 full year audited result.

For Tajudeen Olayinka, a senior stockbroker and Chief Executive Officer of Wyoming Capital and Partners, “we’re aware that most real sector businesses have taken a bitter pill from exchange rate depreciation and declining demand for products in the goods market, arising largely from poor purchasing power by households.”

Olayinka explained that  Nestle has been affected in a way but could come out of the difficult situation strongly, by repricing their earning assets, the same way other companies are expected to follow suit in the immediate to near term.

“Whatever you see now are part of very difficult decisions, economic agents are expected to take in the short run. Short run adjustment pains are unavoidable when the economy is going through a reset or structural adjustment. In the long run when all factors become variable, we will see a better economy and good performance from different sectors of the economy, including the Consumer Goods Sector where Nestle Food Plc rightly belongs. So, whatever you see now is temporary”.

However, looking at the impact of foreign exchange on Nestle Nigeria, the Vice Chairman Highcap Securities Limited, David Adonri pointed out that  Nestle’s half year 2023 result is a big blow to the survival of the enterprise.

According to Adonri “Based on its heavy loss in half a year, Nestle has not only lost its shareholders fund, it is now in negative to the tune of over N38 billion. The situation concerning Nestle is very scary. The company is facing an existential threat and requires injection of fresh equity finance”.

Expressing his concerns on Nestle Nigeria Plc, performance and expectations, one of the leading shareholders advocates in Nigeria and National Coordinator Independent Shareholders Association Of Nigeria (ISAN), Moses Igbrude noted that “Nestle Nigeria Plc good performance over years has been consistent and predictable but the reality of today where the Naira devaluation continues to nose dive is distorting and messing up shareholders  projections”.

Igbrude pointed out that “It is  something that investors cannot predict, Nestle Nigeria Plc will surely give outstanding performance but finance cost and forex losses are my worries because  naira to dollar continued to decline which may wipe off the bottom line”.

Adding that “Investors are not happy with the situation, we appeal to the government to urgently address these current economic challenges that are affecting companies, especially those with dollar denominated loans”.

Looking ahead of 2023 financial year for Nestle Nigeria Plc, there are expectation that Nestle stable and robust business, as Nigeria largest food company with a diverse product portfolio to sustain consistent operating performance in the medium term” but believe the company’s earnings will remain negatively affected by the devaluation of naira through 2023.

Nestlé Nigeria: Nestlé Nigeria is one of the largest food and beverage companies in Africa. For over 59 years, the company has been delighting consumers around Nigeria by consistently delivering high quality nutritious food.

With a staff strength of over 2,200 direct employees, 3 manufacturing sites, 7 branch offices and a head office located in Lagos, the company produces and markets several iconic brands including NESTLÉ PURELIFE, GOLDEN MORN, MILO, MAGGI and NESCAFÉ. Nestlé’s purpose is to unlock the power of food to enhance quality of life for everyone today and for generations to come.