NIGERIA – FrieslandCampina Nigeria, the country’s foremost dairy producer has revealed that the company is facing financial challenges and expects no early recovery after the weakening naira pushed forex expense to US$24.4 million(N18.6bn).
According to details of its recently issued first-half earnings report, the company’s financials took a pounding after continuous depreciation of the naira increased the exchange rate of the naira to the dollar.
This sent its long arrears of payables to foreign trade partners soaring in local currency.
At US$24.4 million (N18.6 billion), foreign currency costs ate up what was posted in gross profit, throwing its bottom line into a loss of US$15.2 million (N11.6 billion), the first time in five years or more.
“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,” the report stated.
A year ago the local subsidiary of Amersfoort-based company generated US$206.7 million (N157.2 billion) in revenue for the period compared to US$224.5 million (N170.7 billion), with exports contributing less than 1% of that.
Currently, FrieslandCampina’s liabilities for the review period stood at US$446.4 million (N339.4 billion) compared to current assets of US$395.3 million (N300.6 billion), showing its working capital could be strained for the rest of the year.
Earlier this year, Netherlands-based FrieslandCampina flagged up US$68.4 million (N30.9 billion at N490.4/€1) in exchange rate losses in the Nigerian subsidiary as a pressure point for operating profit in 2022.
The expenditure constituted 22% of the group’s operating costs in the previous year as a foreign exchange drought meant its converted part of locally earned revenue at a steep cost from naira to US dollars in order to pay international trade creditors.
FrieslandCampina N.V. holds a 67.85% stake in the Nigerian subsidiary, which trades its shares over the counter at the NASD OTC Securities Exchange
The group revenue was up 22.4% at US$15.3 billion in the period under review, with profit leaping to US$317.4 million from US$186.9 million.
FrieslandCampina Nigeria counts its niche market brand Peak Milk as its flagship product.
The group is the seventh biggest dairy company in the world, operating as a cooperative of 15,137 member dairy farmers as of the end of last year, a model it has initiated in Nigeria, where it supports dairy farms in Ogun, Osun, Oyo, Niger and Kwara states.
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