Dangote, BUA, Other Businesses Affected as Naira Hits Lowest in History
- Some manufacturers, including top cement producers like Dangote, BUA, and Lafarge, reported a massive jump in FX losses
- The combined sales of the top three manufacturers in the industry increased from N604.8 billion in Q1 2023 to N1.12 trillion
- This is as the local currency, the naira, reached a high of N1,900 against the US dollar in February, causing companies to revalue
Legit.ng journalist Zainab Iwayemi has over three years of experience covering the Economy, Technology, and Capital Market.
Eight manufacturers, including Dangote, BUA, and Lafarge, experienced foreign exchange-related losses of N627.7 billion in the first quarter of this year.
Source: UGC
This is based on the examination of the companies' financial accounts made available on the Nigerian Exchange Limited.
According to a Punch report, the companies on the list are International Breweries, Nigerian Breweries, Lafarge Africa Plc, BUA Foods, Nestle Nig, BUA Cement, Dangote Sugar, and BUA Cement.
The naira, which was floated about a year ago, saw a sharp decline since the start of the new year, severely damaging organised businesses.
The local currency reached a high of N1,900 versus the US dollar on the parallel market in February, marking the peak of the depreciation, according to a report by TheCable.
Due to this, companies with obligations on their books denominated in foreign currencies had to revalue those obligations to reflect the decline in the local currency, which represents the company's earnings.
Cement companies affected
Lafarge Africa Plc, a cement manufacturer, lost N21.8 billion in forex in the first quarter, compared to a gain of N320 million in the same period last year.
The company's pre-tax and post-tax profits dropped by 61.25% and 65.34%, to N8.71 billion and N5.19 billion, respectively, as a result of large FX revaluation losses and increased operating expenses.
The foreign exchange loss of Dangote Cement, a significant cement maker, increased to N63.77 billion from N9.79 billion.
Despite challenges, the industrial conglomerate managed to quadruple its revenue from N406.72bn in Q1 2023 to N817.35bn in Q1 2024.
BUA Cement, another dominant player in the cement industry, saw a sharp increase in its currency loss to N10.06 billion from a gain of N1.71 billion in the same quarter in 2023.
Due to a 51.51% rise in cement sales, the company's revenue climbed from N106.35 billion in Q1 2023 to N161.13 billion in Q1 2024.
Using its recently put-into-service factories, Obu Line Three and Sokoto Line Five, BUA Cement increased sales volume, but not enough to raise profit margins in the first quarter of 2024.
The top three manufacturers in the sector saw their cumulative revenue increase from N604.8bn in Q1 2023 to N1.12tn.
More businesses report losses
Nestle Nig topped the pack in the food and beverage industry with a N166.9 billion currency loss.
The corporation had a N142.7 billion financial loss in the first quarter of 2024 as a result of the naira's depreciation.
Dangote Sugar, a significant consumer goods company, reported a N102.9 billion forex loss in the first quarter of this year.
Naira depreciation was a significant factor in the company's first-quarter loss of N68.9 billion, which was recorded during the period under review.
In a similar vein, International Breweries saw a N162.2 billion forex loss in the first quarter of this year. Like its peers in the brewing industry, the company has experienced financial difficulties due to the volatility in the foreign exchange market.
It was the company's sixth straight quarter of losing money, with a loss of N60.39 billion reported, compared to a loss of N2.31 billion in Q1 2023.
Nigerian Breweries, its rival, also experienced a N72.8 billion forex loss. The brewer has also had difficulty repaying a €205 million debt since the naira's depreciation.
Compared to N10.715bn reported in the same quarter ended March 31, 2023, the company generated a loss after tax of N52 billion for the first quarter ending on March 31, representing a 386.13% increase.
Similarly, BUA Foods reported a N27.2 billion forex loss for the first quarter.
The company's managing director, Ayodele Abioye, stated that although its gross profit increased by 37.93% to N115.42 billion in Q1 2024 from N56.66 billion in Q1 2023, the majority of its raw materials are dependent on foreign exchange.
Dangote gains new position
Legit.ng reported that despite losing $2.6 billion in April 2024 to the naira's woes, Nigeria and Africa's richest man, Aliko Dangote, has been ranked as the world's sixth richest person in the manufacturing industry.
Dangote is the founder of Africa's largest cement manufacturing company, the Dangote Cement, where he owns about 85% stake, and the Dangote Fertilizer and Refinery, reputed as the world's largest single-train refinery.
Insidermonkey.com, an American firm, carried out the ranking using a hybrid evaluation system to track insider transactions and other market anomalies and educate investors about the complexities of investing.
Proofreading by James Ojo Adakole, journalist and copy editor at Legit.ng.
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Source: Legit.ng
