Forex: FrieslandCampina Nigeria’s N18.6bn expense shows no early recovery from loss 

*At N18.6 billion, foreign currency costs plummeted what was posted in FrieslandCampina Nigeria’s gross profit, throwing its bottom line into a loss of N11.6 billion, the first time in five years or more, according to report

Isola Moses ConsumerConnect

FrieslandCampina Nigeria, foremost dairy producer in the West African country expects no quick fix 2023 to the complications an unusually vast Foreign Exchange (Forex) expense has caused in its operations, says report.

Details of the conglomerate’s recently  published first-half earnings report, FrieslandCampina Nigeria’s financials were hit after continuous depreciation of the Naira, the country’s national currency, increased the exchange rate of the Naira to the US Dollar.

The development reportedly sent the company’s long arrears of payables to foreign trade partners soaring in the local currency.

In the region of N18.6 billion, foreign currency costs plummeted what was posted in gross profit, throwing its bottom line into a loss of N11.6 billion, the first time in five years or more.

The report stated: “The company foresees that the results for the year will be impacted, as we do not expect a full recovery of this significant exceptional expense in this financial year.”

It was learnt that the local subsidiary of Amersfoort-based Royal FrieslandCampina N.V., regarded as the world’s biggest dairy cooperative, FrieslandCampina, generated N157.2 billion in revenue for the period compared to N170.7 billion a year ago, with exports contributing less than a percent of that.

Supply of the dollar to the Nigerian Foreign Exchange Market (so lately named) has been in dribs and drabs as the government earnings from abroad shrink, forcing it to conserve its grossly limited reserves and leaving manufacturers, who depend on imported raw materials, at the receiving end.

The ramifications are taking a more harrowing turn for multinationals in Nigeria exemplified by an April disclosure by Heineken-backed Nigerian Breweries of a potential shutdown of operations if its parent company does not agree to convert a dollar-denominated debt into an intercompany loan.

It is also recalled that early August this year, British drugmaker GlaxoSmithKline (GSK), makers of Panadol, Andrews Liver Salt, Ribena, Lucozade and other popular consumer brands announced its planned exit from the country.

However, a report said GSK refrained from divulging the rationale behind the company’s imminent exiting Africa’s largest economy.

However, its half-year earnings report issued on the same day of the announcement indicated that unrealised exchange loss was the single biggest drain on its financials as revealed in its cashflow statement.

FrieslandCampina’s current liabilities for the review period stood at N339.4 billion compared to current assets of N300.6 billion, showed its working capital could be strained for the rest of the year.

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