By Chukwuma Umeorah
Shareholders of Nestle Nigeria plc have urged the company’s management to enhance its local sourcing for raw materials to mitigate the adverse impacts of foreign exchange (FX) losses, which significantly affected its financial performance in FY 2023.
The call was made during the company’s 55th Annual General Meeting (AGM) in Lagos, yesterday, where concerns over the steep devaluation of the Naira and its resultant impact on the company’s profitability and shareholder funds were discussed.
Commenting on the company’s financials in the year under review, Sunny Nwosu of Independent Shareholders’ Solidarity Association of Nigeria (ISSAN) highlighted that 55 per cent of the company’s inputs were imported, costing N203.9 billion, compared to N166.87 billion spent on locally sourced materials. “We need to improve our local sourcing of materials and equipment. Also, we should avoid any loans in foreign exchange and avoid anything that would cost us foreign exchange. That would also help our local farmers and businesses where these raw materials will be sourced,” Nwosu asserted.
Another shareholder Nonah Awoh said that the company needed to invest more in Research and Development. According to him, “The dependency on expatriates and foreign research strategies would be reduced to the minimum if we build research facilities and more local people can be trained to carryout these roles. If we put a fraction of the money spent on Research abroad in our local Universities, we would be amazed the results we would get.”
On his part, the National Coordinator, Progressive Shareholders Association of Nigeria (PSAN) Boniface Okezie, raised concerns about the lack of dividend payouts, noting that while the macroeconomic environment posed significant challenges, the company should explore innovative strategies to improve its operations and ensure dividend declarations in the future.
The Chairman, Nestle Nigeria, Gbenga Oyebode responding to the shareholders’ concerns, acknowledged the broader macroeconomic challenges characterized by high inflation, an elevated Monetary Policy Rate (MPR), and significant currency devaluation, affecting the FMCG sector, including forex losses and the volatile economic environment. “For a company like ours that has been here for 63 years, we have seen all kinds of economic situations, but we remain strong and resilient in delivering value to our shareholders,” Oyebode stated.
He pointed out that Nestle Nigeria is already making substantial efforts in backward integration, sourcing most of its inputs locally, such as palm oil and grains. However, he noted, “We do not have the luxury of complete backward integration to the extent of setting up our own farms or plantations is currently impractical due to certain economic constraints and global market dynamics.”
Oyebode also addressed the necessity of foreign currency loans, explaining that the company had to resort to intercompany loans from its parent company due to the inability to source sufficient foreign currency domestically.
Looking forward, Oyebode expressed optimism for a turnaround in 2024, emphasizing the company’s strategic focus on innovation and operational excellence.
The shareholders also elected Maryam Mohammed and re-elected Mauricio Alarcon as directors of the company.
In FY 2023, Nestle reported a 22.4 per cent revenue growth up to N547.1 billion from the N446.8 billion posted in 2022. However, the company posted a loss after tax of N79.5 billion due to its net finance costs which hit N227.8 billion in 2023. The increase in net finance costs was linked to the company’s foreign currency obligations, which are mostly long-term intergroup loans owed to the parent company revalued at the 2023 closing rate of N907.11/$.