NESTLE NEEDS FRESH CAPITAL TO OVERCOME N177BN LOSS – ANALYSTS
SUMMARY:
Nestlé Nigeria is facing severe financial difficulties, having reported a staggering loss of ₦176.9 billion in the first half of 2024. This marks a dramatic increase of 254.51% compared to the ₦49.9 billion loss recorded in the same period last year. Analysts suggest that the company may need additional equity capital and potential government intervention to stabilize its financial standing.
Key Points:
1. Impact of Naira Devaluation:
- The loss is attributed primarily to the devaluation of the naira, which has led to a revaluation of Nestlé’s foreign currency obligations.
2. Analyst Insights:
- David Adonri, a board member at Highcap Securities Limited, highlighted that the extent of the loss threatens Nestlé’s solvency and raises concerns about its ongoing viability. He suggested that fresh equity could prevent further risks to the company’s going concern status.
- Professor Akpan Ekpo from the University of Uyo pointed out that ongoing financial losses could lead to workforce reductions and negatively affect the broader economy, given the company’s significant employment impact.
3. Potential Recovery Strategies:
- Analysts believe that if Nestlé can manage to reduce its costs and receive government support, including tax breaks and relief on utility and import taxes, the company may be able to recover in the latter half of 2024.
4. Recommendations:
- The company might also benefit from rescheduling loan repayments with banks, especially if its historical performance has been strong.
SUMMARY:
Nestlé Nigeria is facing severe financial difficulties, having reported a staggering loss of ₦176.9 billion in the first half of 2024. This marks a dramatic increase of 254.51% compared to the ₦49.9 billion loss recorded in the same period last year. Analysts suggest that the company may need additional equity capital and potential government intervention to stabilize its financial standing.
Key Points:
1. Impact of Naira Devaluation:
- The loss is attributed primarily to the devaluation of the naira, which has led to a revaluation of Nestlé’s foreign currency obligations.
2. Analyst Insights:
- David Adonri, a board member at Highcap Securities Limited, highlighted that the extent of the loss threatens Nestlé’s solvency and raises concerns about its ongoing viability. He suggested that fresh equity could prevent further risks to the company’s going concern status.
- Professor Akpan Ekpo from the University of Uyo pointed out that ongoing financial losses could lead to workforce reductions and negatively affect the broader economy, given the company’s significant employment impact.
3. Potential Recovery Strategies:
- Analysts believe that if Nestlé can manage to reduce its costs and receive government support, including tax breaks and relief on utility and import taxes, the company may be able to recover in the latter half of 2024.
4. Recommendations:
- The company might also benefit from rescheduling loan repayments with banks, especially if its historical performance has been strong.