Not less than eight leading Nigerian manufacturers, including industry giants Dangote, BUA, and Lafarge, have reported significant foreign exchange (forex) losses totaling N627.7 billion in the first quarter of 2024.
This stark revelation comes from an analysis of the financial statements of these firms, which were published on the Nigerian Exchange Limited.
The affected companies span a range of sectors, including cement production, food and beverages, and consumer goods.
The listed firms are Lafarge Africa Plc, BUA Foods, Nestle Nigeria, BUA Cement, Dangote Sugar, International Breweries, Nigerian Breweries, and Dangote Cement.
PLATFORM TIMES reports that each of these manufacturers has been significantly impacted by the steep depreciation of the naira, which has severely affected their forex-denominated obligations.
Since the beginning of 2024, the naira, which was floated nearly a year ago, has experienced dramatic depreciation.
The peak of this depreciation occurred in February when the naira traded as high as N1,900 against the dollar on the parallel market.
This rapid decline has compelled firms with forex-denominated liabilities to revalue these obligations, significantly increasing their reported losses.
Cement Industry: Lafarge, Dangote, BUA
Cement manufacturer Lafarge Africa Plc reported a forex loss of N21.8 billion, a sharp increase from a gain of N320 million in the same period last year.
This loss has contributed to a 65.34% drop in the company’s post-tax profit to N5.19 billion. CEO Lolu Alade-Akinyemi highlighted that despite growth in cement sales, the forex losses from naira depreciation substantially eroded after-tax profits.
Similarly, Dangote Cement saw its forex loss surge to N63.77 billion from N9.79 billion. Despite this, the company managed to double its revenue to N817.35 billion, showcasing resilience amidst challenging conditions.
BUA Cement also experienced a significant forex loss of N10.06 billion, contrasting with a gain of N1.71 billion in the previous year.
BUA Cement’s revenue increased to N161.13 billion, leveraging its newly commissioned plants to boost sales volume, although this was not enough to improve overall profit margins.
Food,Beverage Sector: Nestle, BUA Foods
In the food and beverage sector, Nestle Nigeria led with a forex loss of N166.9 billion, resulting in a net loss of N142.7 billion for the quarter.
CEO Wassim Elhusseini remarked on the challenging business environment, attributing the adverse financial results to the further devaluation of the naira.
BUA Foods, despite growing its gross profit by 37.93% to N115.42 billion, recorded a forex loss of N27.2 billion.
Managing Director Ayodele Abioye pointed out that the depreciation of the naira by 24.51% from January to March was a significant factor driving these losses, given the company’s reliance on FX-dependent raw materials.
Breweries: International Breweries and Nigerian Breweries
International Breweries reported a forex loss of N162.2 billion, marking its sixth consecutive loss-making quarter. The company’s loss after tax rose dramatically to N60.39 billion from N2.31 billion in Q1 2023. Similarly, Nigerian Breweries faced a forex loss of N72.8 billion and struggled with a €205 million debt exacerbated by the naira’s depreciation. The brewer’s loss after tax skyrocketed by 386.13% to N52 billion compared to the previous year.
Consumer Goods: Dangote Sugar
Dangote Sugar recorded a forex loss of N102.9 billion in the first quarter.
The naira’s depreciation was a major factor in the company’s N68.9 billion loss, underscoring the severe impact of currency volatility on the consumer goods sector.
The significant forex losses across these eight manufacturers highlight the profound impact of the naira’s depreciation on Nigeria’s industrial sector.
The financial strain from revaluing forex obligations has not only slashed profits but also underscored the broader economic challenges faced by businesses operating in Nigeria.
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