Economy
How Forex, Tax Frustrated Nestlé Nigeria Plc in 2016

By Modupe Gbadeyanka
The year 2016 would go down as an annus horribilis in the annals of Nestlé Nigeria Plc as the company posted its lowest EPS (-67% YoY to N10) in eight years even as the stock price declined to multi-year lows as noted by ARM Securities in its earlier report.
According to ARM Securities, as with the broader economy, Nestlé’s result was weighed down by fall-out from the 53 percent Naira depreciation which cascaded into N16.3 billion in FX losses over 2016.
In addition, the expiration of tax holidays on its Agbara factory drove a 44pps YoY jump in effective tax rate to 63 percent.
Accordingly, Nestlé reported a weighty decline in dividend per share of N10.00 (-67% YoY) which translates to a dividend yield of 1.3% using last trading price.
Going into 2017, the key risk for Nestlé remains the sizeable FX exposure on its books which comprises FCY loans to its parent and trade payables.
In addition, continued rise in domestic grain prices, which drove gross margin pressures in 2016, poses downsides to earnings.
As earlier stated by ARM Securities, Nestlé booked N16.3 billion in FX losses, housed under finance expenses, following Naira depreciation over 2016.
The FX losses stemmed from sizable Dollar borrowings, which rose 27 percent YoY to $152 million (92% of total debt).
Nestlé noted that an illiquid FX market compelled the company to acquire a one-year $40 million loan1 from its parent company (Nestlé S.A) to address working capital needs.
Furthermore, Dollar paucity forced Nestlé to seek extended credit terms from related parties (+182% YoY to N38.6 billion) which underpinned the jump in trade payables to record levels
(+76.4% YoY to N64.7 billion).
Over FY 16, Nestlé paid $15.1 million to related parties as part repayment on FCY loans owed while cash rose four times to multi-year highs of N51.4 billion presumably being stockpiled to acquire needed FX for loan repayments of N38.3 billion due in 2016 and 2017.
As earlier stated, higher effective taxes over 2016, following the expiration of pioneer tax holiday on its on Flowergate factory at Agbara, piled more pressure on earnings. The development drove a steeper contraction in post-tax earnings (-67% YoY) relative to pre-tax (-25% YoY).
In addition to FX and taxation issues, Nestlé struggled with rising input costs as elevated West African demand for Nigerian grains, a by-product of naira weakness underpinned an upswing in prices of key inputs YoY (CPO: +250%, sorghum: +150%, Maize: +108%).
To combat input cost inflation (COGS: +27% YoY), Nestlé implemented price increases of 30%-40% across its product portfolio (particularly Maggi and Milo which comprise ~75% of revenue) which translated into double digit growth in revenues (+20.3% YoY) largely buoyed by its food segment (+25.4% YoY).
Nonetheless, relative to the inflation in grain prices, the price hikes paled in comparison, which resulted in gross margin compression to four-year lows of 41 percent.
Going into 2017, as with most FMCGs, Nestlé guides to pushing through further price hikes to offset the inflationary pressures. That said, softer real income levels2 should result in subdued volume growth and as such we see topline growth pulling back from the 2016 heights. Specifically, we look for a 14.5 percent YoY increases in sales to N208.3 billion as we think Nestlé’s defensive product portfolio and relatively better pricing power should help weather the macro headwinds to consumer purchasing power.
In terms of input costs, we expect grain prices to remain elevated over H1 2017 due to higher regional demand for domestic grains (such as maize and sorghum) on the back of relative weakness of the Naira (NGN) vis-à-vis other West African currencies. However, towards H2 2017, we expect regional demand for local grains to moderate as improving FX liquidity drives naira appreciation at the parallel market and reduces bargaining power of local suppliers.
Source: www.armsecurities.com.ng
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Economy
BNB Price Reflects Changing Dynamics in the Digital Asset Market
Economy
NASD Unlisted Security Index Crosses 4,000-point Benchmark Again
By Adedapo Adesanya
The NASD Over-the-Counter (OTC) Securities Exchange achieved a milestone on Friday, April 24, 2026, after five securities on the platform helped with a 1.85 per cent growth.
Data showed that the NASD Unlisted Security Index (NSI) again crossed the 4,000-point benchmark yesterday.
The index chalked up 73.64 points during the trading day to close at 4,052.59 points compared with the preceding session’s 3,978.95 points, while the market capitalisation added N5.38 billion to finish at N2.424 trillion versus Thursday’s closing value of N2.380 trillion.
The price gainers were led by Okitipupa Plc, which grew by N25.00 to sell at N305.00 per share compared with the previous price of N280.00 per share. Central Securities Clearing System (CSCS) Plc gained N6.92 to close at N76.26 per unit versus N69.34 per unit, Afriland Properties Plc appreciated by N1.00 to N17.00 per share from N18.00 per share, FrieslandCampina Wamco Nigeria Plc improved by 55 Kobo to N99.55 per unit from N99.00 per unit, and Food Concepts Plc increased by 5 Kobo to N2.70 per share from N2.65 per share.
However, there was a price loser, MRS Oil, which dipped by N21.75 to N195.75 per unit from N217.50 per unit.
During the final session of the week, the value of securities jumped 75.2 per cent to N41.3 million from N23.6 million units, and the number of deals expanded by 62.9 per cent to 44 deals from 27 deals, while the volume of securities declined marginally by 0.9 per cent to 447,403 units from 451,522 units.
At the close of trades, Great Nigeria Insurance (GNI) Plc was the most traded stock by volume (year-to-date) with 3.4 billion units worth N8.4 billion, trailed by Resourcery Plc with 1.1 billion units valued at N415.7 million, and Infrastructure Guarantee Credit Plc with 400 million units traded for N1.2 billion.
GNI was also the most active stock by value (year-to-date) with 3.4 billion units sold for N8.4 billion, followed by CSCS Plc with 59.6 million units transacted for N4.0 billion, and Okitipupa Plc with 27.8 million units exchanged for N1.9 billion.
Economy
Naira Slips to N1,358/$1 as FX Reserves, Policy Uncertainty Concerns
By Adedapo Adesanya
It was not a good day for the Nigerian Naira in the currency market on Friday, April 24, as its value depreciated against the major foreign currencies at the close of transactions.
In the Nigerian Autonomous Foreign Exchange Market (NAFEX), it lost N4.53 or 0.33 per cent against the United States Dollar yesterday to trade at N1,358.44/$1, in contrast to the N1,353.91/$1 it was exchanged on Thursday.
Equally, the domestic currency slipped against the Pound Sterling in the official market during the session by N8.14 to close at N1,834.02/£1, compared with the previous rate of N1,825.88/£1 and dropped N8.01 against the Euro to sell at N1,590.73/€1 versus N1,582.72/€1.
Also, the Naira depreciated against the US Dollar at the GTBank FX desk on Friday by N4 to quote at N1,370/$1 compared with the previous session’s N1,366/$1, and at the parallel market, it depleted by N5 to settle at N1,380/$1 versus the preceding day’s N1,375/$1.
Data published by the Central Bank of Nigeria (CBN) indicated that NFEM interbank turnover surged to N43.562 million across 68 deals, up from N28.117 million the previous day.
Despite the CBN’s reassurance that the recent drop in external reserves is not worrisome, the market remains unsettled by persistent concerns over liquidity constraints, policy transparency, and weakening confidence in Nigeria’s FX market as gross reserves continue to decline to $48.4 billion.
The outlook for the Dollar appears supported by broader macro risks, including elevated oil prices tied to the tanker traffic disruptions in the Strait of Hormuz and a continued US-Iran standoff over ceasefire negotiations.
A look at the digital currency market showed that investors are sitting on the edge as the US Dollar rebounded amid geopolitical and inflation risks despite continued inflows into US spot bitcoin Exchange Traded Funds (ETFs).
Solana (SOL) rose by 1.2 per cent to sell $86.45, Cardano (ADA) appreciated by 1.1 per cent to $0.2517, Dogecoin (DOGE) grew by 0.9 per cent to $0.0989, Ripple (XRP) improved by 0.3 per cent to $1.43, Ethereum (ETH) soared by 0.2 per cent to $2,316.83, and Binance Coin (BNB) chalked up 0.1 per cent to sell for $637.44.
However, TRON (TRX) depreciated by 1.3 per cent to $0.3235, and Bitcoin (BTC) lost 0.2 per cent to close at $77,562.27, while the US Dollar Tether (USDT) and the US Dollar Coin (USDC) closed flat at $1.00 each.
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