Nestle Nigeria Plc (NGX: NESTLE) has reported a loss of N43.06bn for the nine months period ended 30 Sept., 2023. The company released its Quarter 3 financial statements on 27th Oct., 2023.
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The monumental loss signifies a 207.26% decrease from the N40.15bn it reported for the same period in 2022. The loss reported is despite the 18.93% year-on-year growth in revenue, and 36.56% growth in gross profit.
Finance costs, occasioned by foreign exchange loses amounted to N156.52bn expense item which wiped off the companies earnings and threw it into the N43.06bn loss.
A consequence of the huge loss on the company’s balance sheet is a situation wherein the company’s total liability exceeded it’s total asset.
While the company’s balance sheet showed total asset of N499.93bn, it’s total liability stood at N541.60bn, putting it in an asset deficiency situation.
Asset deficiency is a situation where a company’s liabilities exceed its assets. Asset deficiency is a sign of financial distress and indicates that a company may default on its obligations to creditors and may be headed for bankruptcy.
The Directors made an assessment of the Company’s ability to continue as a going concern and stated that they have no
reason to believe the Company will not remain a going concern in the year ahead.
Analysis of Statement of Profit or Loss and Other Comprehensive Income
Revenue: Nestle reported a revenue of N396.59bn, 9.36% growth on the N333.47bn it reported in 9 2022.
N396.10bn (9M 2022: N330.58bn) was revenue arising from sales of goods in Nigeria, while N488.02mn (9M 2022: N2.88bn) was earned from Export.
Gross Profit: The company posted a gross profit of N160.17bn, 9.36% higher than the N117.28bn it posted in the preceding year.
Marketing & Administrative Expenses: N58.88bn was spent in 9M 2023, 35.73% lower than the N43.38bn spent in the preceding year.
Administrative expenses: Nestle spent N9.70bn on administration, 7.49% higher than the N9.02bn it spent in the preceding year.
Finance cost: The company booked a finance cost of N156.52bn, an astronomical rise of 1625.78% from the N9.07bn it reported in 9M 2022.
N127.45bn of this cost came from net exchange loss on translation of foreign currency denominated balances, while N29.07bn was interest expense on financial liabilities.
Profit Before Tax: The company posted a 197.04% year-on-year decline in profit before tax, as the PBT dropped from N58.38bn in 9M 2022, to minus N56.65bn in 9M 2023.
Profit After Tax: This dropped by 207.26% from N40.15bn in 9M 2022, to minus N43.06bn in 9M 2023.
Analysis of Statement of Financial Position:
Assets: Nestle’s total assets rose to N499.93 billion, 17.31% higher than N415.04 billion as at December 31, 2022.
Cash and short term deposits make up a significant portion of the company’s total assets, rising to N152.27 billion from N117.92 billion.
Trade and other receivables rose to N96.47bn from N82.23 billion as at Dec. 31, 2022.
Liabilities: Total liabilities increased to N541.60 billion from N384.75 billion as at 31 Dec. 2022, a 40.77% increase.
The major component on the company’s liabilities loan and borrowings, which increased by 106.34% from N155.29bn to N320.43bn.
The company’s liability as at September 30, 2023, is higher than its asset.
Equity: The total equity moved from N30.29bn as at 31 Dec. 2022, to minus N41.67bn.
The huge loss booked by the company sent its retained earnings tumbling from N29.77bn to minus N42.22bn.
Analysis of Statement of Cash Flow
Net cash flow generated from operating activities rose to N53.26 billion, up from N4.34 billion in 9M 2022.
Net cash of N26.64bn was used investing activities, against N12.01bn used in 9M 2022.
N7.59bn net cash was provided by financing activities, lower than N12.45bn cash in flow in the preceding year.
At the end of the period, the company has a cash and cash equivalent of N152.27bn (9M 2022: N107.13bn).
About the company
Nestlé Nigeria Plc is a Company domiciled in Nigeria, incorporated on September 25, 1969. The address of the Company’s registered office is at 22-24, Industrial Avenue, Ilupeju, Lagos.
The Company listed on the Nigerian Exchange on April 20, 1979.
The principal activities of the Company continue to be the manufacturing, marketing and distribution of food products including purified water throughout the country. The Company also exports some of its products to other countries within and outside Africa.
The company has 792.65 million outstanding ordinary shares. 66.18% of these shares are owned by Societe Des Produits Nestlé S.A, Switzerland, while ZPC/SIPML RSA FUND owns 5.18%.
Nnamdi Maduakor is a Writer, Investor and Entrepreneur