August 05, (THEWILL) – The prospects of expanding tax revenues and job opportunities are slimming down as Nigeria’s major service and consumer good firms reported massive operating losses in their operations during the first half of 2024.
Operating results of most of these firms showed that they are still trapped in the claws of losses which began in their 2023 activities following the harsh operating environment arising from the policies of the President Bola Tinubu-led government
The twin effects of this scenario is significant drop in the growth of tax revenues and employment opportunities which spur economic growth and boost standards of living among the people; Before this unfavourable development, the three tiers of government had recorded massive increase in the company income and pay-as-you-earn taxes as well as other revenue yielding windows offered by these companies. But the story is not going to be the same this year following reports of massive losses suffered by these firms even where their revenue haul improved significantly.
Nestle Nigeria Plc posted a pre-tax loss of N252.5 billion in the 2024 half-year, marking a 265% year-on-year decrease from the N69.1 billion pre-tax loss posted in H1 2023. This is notwithstanding that during the period, the company posted a revenue of N407 billion, representing a 55% year-on-year increase from the N261.8 billion posted in H1 2023, while its gross profit hit N127.3 billion, marking a 19% year-on-year growth from N107 billion.
Another major consumer goods firm, Nigerian Breweries Plc, posted a pre-tax loss of N50.8 billion for the quarter ending June 30, 2023. It marks a marginal 0.7% year-on-year decline from the N50.4 billion pre-tax loss posted in Q2 2023. During the quarter, the foremost brewer posted revenue of N251.8 billion, marking a 63% year-on-year growth from N154.1 billion posted in Q2 2023.
Another major consumer goods firm, Dangote Sugar Plc, posted a pre-tax loss of N104.6 billion in the second quarter of 2024, marking a 110% year-on-year decline from the N49.9 billion pre-tax loss posted in Q2 2023. However, in Q2 2024, the company posted revenue of N172.9 billion, contributing to a half-year revenue of N295.6 billion. It recorded a 72% year-on-year revenue growth from the N100.6 billion revenue posted in Q2 2023.
Similarly, cadbury Nigeria Plc reported a pre-tax loss of N3.423 billion for Q2 2024, though a significant improvement from the N10.457 billion loss recorded in Q1. The result moderated the half-year 2024 loss to N13.880 billion, which is 4.5% lower than the loss recorded in the same period in 2023.
The company reported a pre-tax loss of N28.157 billion in 2023, a stark contrast to the pre-tax profit of N1.298 billion achieved in 2022.
Also, International Breweries Plc recorded a pre-tax loss of N61.81 billion for its second quarter of 2024. This represents a decline from the N89.35 billion pre-tax loss recorded in the first quarter of the year. When compared to the corresponding quarter of the previous year, the company’s losses rose from N37.31 billion in Q2, 2023.
Another multinational firm, Guinness Nigeria Plc, built the biggest loss in many years of trading in its financial year ending June 2024, with net loss towering at N61.7 billion at the end of the third quarter (Q3).
The net loss swelled from N7.8 billion incurred in the second quarter (Q2), sweeping off its Q1 profit of N2.6 billion, to N56.4 billion for the third quarter.
The company’s interim financial report for its Q3 ended March 2024, showed a deep plunge from a net profit of N1.8 billion in the same quarter last year and from its closing net loss of N5.2 billion at half year.
The brewing company was in the red for the second year, having closed the 2023 operations in June with a net loss of N18.2 billion.
However, in a landmark deal set to reshape Nigeria’s beverage market, THEWILL recalls that Tolaram Plc agreed to acquire Diageo’s 58.02% shareholding in Guinness Nigeria Plc. Guinness made this announcement via a press release on the website of the NGX. This announcement added to the string of major multinational organisations exiting the country citing tough economic challenges.
Honeywell Flour Mills, one of Nigeria’s major flour milling companies, reported its financial year-end audited accounts during the period, stating that it posted a loss of N8.5 billion, marking its third consecutive year of reporting pre-tax losses.
THEWILL recalls that Rival Flour Mills Plc acquired 85% of the company in a N28 billion deal in 2022, gaining 85% control of the company’s equity. Flour Mills paid N4.2 per share for Honeywell.
However, since then, Honeywell has struggled to post profits due to a combination of macroeconomic challenges such as higher inflation, exchange rate depreciation, and weak economic growth. In 2022, it reported a pre-tax loss of N172 million, and in 2023, N8.9 billion.
In the telecom sector, MTN Nigeria Plc posted a pre-tax loss of N175.6 billion for the quarter ending June 30, 2024, reflecting a 38% year-on-year appreciation from the N282.3 billion pre-tax loss as of Q2 2023.
According to the group’s financial statement for the period ending June 30, 2024, it posted a revenue of N786.1 billion during the quarter, marking a 33% year-on-year growth from N591 billion as of Q2 21 billion as of Q2 2023.23.
In the first six months of 2024, MTN Nigeria recorded revenue of N1.54 trillion, marking a 33% appreciation from N1.16 trillion as of H1 2023.
The challenges faced by these companies stemmed from the economic policies of the Nigerian government under President Tinubu.
In June last year, the Central Bank of Nigeria (CBN) merged all segments of the FX market into the Investors and Exporters window, later called Nigerian Foreign Exchange Market (NAFEM) and reintroduced the willing buyer, willing seller model.
The naira has continued to depreciate against the dollar and other major foreign currencies since then.
The official exchange rate fell from N463.38/$ to
N1,586.7/$ as of July 24, 2024. At the parallel market, the naira is now pushing above N1,585/$ from 762/$ before May 2023
To tackle the astronomical rise in inflation which these policies created, The CBN embarked on aggressive inflation-targeting policies. However, available data showed that the aggressive monetary policy drive of the CBN has not reflected positively on the productive sector of the economy, if anything it seems to have worsened the situation, according to stakeholders.
The umbrella body of major manufacturers in Nigeria, the Manufacturers Association of Nigeria (MAN) disclosed that 767 manufacturing companies shut down while 335 others became distressed in 2023 as CBN’s tight monetary policy bites harder.
The manufacturers lamented that the continuous adoption of tight monetary policy is worsening the already bad situation of the real sector, and called for a robust synergy between the monetary and fiscal authorities.
Segun Ajayi-Kadir, Director General of MAN, said: “In broad terms, the implications of maintaining the same pattern of monetary policy decisions in the last two years are evident in the continuous macroeconomic instability prevalent in the economy with overwhelming impact on the manufacturing sector in Nigeria.”
Industry experts said the current challenging environment reflects in high cost of funds, dwindling access to finance, high cost of sales and raw materials, high operating expenses as well as battling with poor infrastructure.
Sam Diala is a Bloomberg Certified Financial Journalist with over a decade of experience in reporting Business and Economy. He is Business Editor at THEWILL Newspaper, and believes that work, not wishes, creates wealth.
