Royal FrieslandCampina NV’s Nigerian subsidiary, FrieslandCampina WAMCO Nigeria, reported a record net loss of N10.3 billion for the first quarter of 2023.
This is in contrast to the N2.9 billion net profit the company recorded in the same period last year.
The loss was attributed to the settlement of foreign currency-denominated obligations to trade partners, which have been inflated by Nigeria’s foreign exchange scarcity in recent years.
According to the company’s earnings report, a backlog of past dues reaching back to 2020 that couldn’t be repaid due to the inability to source enough forex resulted in an exceptional foreign currency expense of N14.1 billion.
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This, coupled with higher interest costs at N4 billion, had the most significant impact on the company’s bottom line for the period.
FrieslandCampina WAMCO Nigeria, which manufactures noble milk brands like Peak and Three Crowns, as well as infant formula Friso, relies heavily on imports and foreign exchange for its operations.
The company expects the exceptional expense to have sweeping implications for its financials this year, with a full recovery expected to occur beyond December.
The forex crunch in Nigeria, which began during the coronavirus pandemic in 2020, is tightening the noose on FMCG firms in Africa’s largest economy.
For the three months under review, FrieslandCampina WAMCO Nigeria posted a slight drop in revenue to N81.9 billion. Cost of sales contracted by 6%, but selling and distribution costs accelerated by one-fifth to almost N7 billion.
FrieslandCampina WAMCO Nigeria trades its shares over the counter at Lagos NASD OTC Securities Exchange, where they are quoted at N71.50 per unit and a market capitalisation of N139.6 billion at market close on Tuesday.
Royal FrieslandCampina NV, the parent company, highlighted an exchange rate loss of €63 million (N30.9 billion at N490.4/€1) in its Nigerian operation in its 2022 financial statement.