Eight of Nigeria’s leading manufacturers, including industry giants like Dangote, BUA, and Lafarge, have collectively reported foreign exchange-related losses amounting to N627.7 billion in the first quarter of 2024.
This revelation comes from an analysis of the financial statements of these firms, published on the Nigerian Exchange Limited.
The companies in question are Lafarge Africa Plc, BUA Foods, Nestlé Nigeria, BUA Cement, Dangote Sugar, International Breweries, Nigerian Breweries, and Dangote Cement.
The naira’s dramatic depreciation over the past year, especially since its floatation, has severely impacted businesses.
The most significant devaluation occurred in February, with the naira plummeting to N1,900 against the dollar in the parallel market.
This depreciation forced companies with foreign exchange-denominated obligations to revalue these liabilities, drastically affecting their financial statements.
Cement Manufacturers Take the Hit
Lafarge Africa Plc recorded a forex loss of N21.8 billion, a stark contrast to a gain of N320 million in the same period last year.
This significant loss, coupled with increased operating expenses, led to a 61.25% drop in pre-tax profit to N8.71 billion and a 65.34% decline in post-tax profit to N5.19 billion.
CEO Lolu Alade-Akinyemi commented, “Even though the company experienced growth in cement sales as the market recovered in the quarter, the foreign exchange losses due to further naira depreciation resulted in an after-tax profit decline of 65%.”
Dangote Cement also saw its forex loss surge to N63.77 billion from N9.79 billion previously.
Despite this, the company managed to double its revenue to N817.35 billion in Q1 2024 from N406.72 billion in Q1 2023.
Similarly, BUA Cement’s forex loss jumped to N10.06 billion from a gain of N1.71 billion the previous year.
The company’s revenue increased to N161.13 billion in Q1 2024 from N106.35 billion in Q1 2023, driven by a 51.51% rise in cement sales.
Food and Beverage Sector Struggles
In the food and beverage sector, Nestlé Nigeria led with a forex loss of N166.9 billion, translating to a net loss of N142.7 billion for the quarter.
CEO Wassim Elhusseini noted, “Further devaluation of the naira led to the revaluation of our foreign currency obligations, adversely impacting our profit after tax.”
Dangote Sugar recorded a forex loss of N102.9 billion in Q1 2024, contributing to a net loss of N68.9 billion for the period.
International Breweries’ forex loss soared to N162.2 billion, leading to a loss of N60.39 billion, compared to N2.31 billion in Q1 2023. This marks the company’s sixth consecutive loss-making quarter.
Nigerian Breweries also faced challenges, with a forex loss of N72.8 billion.
The brewer struggled to offset a €205 million debt due to naira depreciation, resulting in a post-tax loss of N52 billion, a 386.13% increase from the N10.715 billion loss in the same period last year.
BUA Foods and Market Challenges
BUA Foods reported a forex loss of N27.2 billion. Despite a 37.93% increase in gross profit to N115.42 billion, Managing Director Ayodele Abioye noted, “The bulk of our raw materials are FX-dependent.
The depreciation of the naira was a major driver of the N27.29 billion FX loss incurred by BUA Foods in the quarter.”
Expert Insights
Olusegun Vincent, a senior lecturer at Pan-Atlantic University, explained that forex-related losses do not always result in actual cash flow impacts.
“Some of these exchange losses are unrealised.
For example, if I have an obligation to pay a foreign debt in two years, the loss incurred by the debt which is yet to be paid is called unrealised exchange loss.
It will still be reported in the statement that the company made losses.”
