Business a.m.
Shareholders of Nestle Nigeria Plc have urged the company’s management to explore local sourcing of raw materials as a means to offset the debilitating effects of foreign exchange (FX) losses.
The call was made during the company’s 55th Annual General Meeting (AGM) in Lagos, recently, where the stakeholders reasoned that the action would serve as an effective move against the adverse impacts of FX losses, which had inflicted a significant blow to the company’s financial performance in FY 2023.
In his remarks, Sunny Nwosu of the Independent Shareholders’ Solidarity Association of Nigeria (ISSAN), noted that 55 percent of the company’s inputs were imported, costing the company N203.9 billion. By contrast, the company allocated N166.87 billion towards the procurement of 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 stated.
Nonah Awoh, another shareholder,advocated for increased investments in research and development. He argued that a renewed emphasis on building domestic research facilities and training local talent would reduce the company’s heavy reliance on expatriates and foreign research strategies, yielding significant benefits.
According to Awoh, by allocating even a fraction of the funds currently spent on research abroad to local universities, the company would be impressed by the results achieved. He added that such a move would not only boost the company’s self-sufficiency but also contribute to the development of local talent and industry.
Boniface Okezie, national coordinator of the Progressive Shareholders Association of Nigeria (PSAN), spoke on the company’s lack of dividend payouts, even as he acknowledged the difficulties imposed by the macroeconomic environment.
Okezie underlined the importance of shareholder returns and urged the company to pursue innovative solutions that would not only boost its operations but also create conditions conducive to dividend declarations in the future.
During the meeting, shareholders re-elected Mauricio Alarcon and also welcomed Maryam Mohammed to the board of directors.
Gbenga Oyebode, chairman of Nestle Nigeria, addressed the concerns of the shareholders, giving an assessment of the macroeconomic challenges facing the company and the wider Fast Moving Consumer Goods (FMCG) sector. He recognised the adverse impact of high inflation, the elevated Monetary Policy Rate, and the steep currency devaluation, which had exacerbated forex losses and triggered volatility in the economic environment.
Despite these hardships, Oyebode expressed confidence in Nestle Nigeria’s resilience, citing the company’s enduring presence in the market for 63 years and reaffirming its commitment to delivering value to its shareholders.
The Nestle Nigeria chairman highlighted the company’s ongoing efforts to strengthen its backward integration strategy, citing the local sourcing of key inputs, such as palm oil and grains, as evidence of their commitment.
However, Oyebode cautioned that complete backward integration through the establishment of company-owned farms or plantations remained a pipe dream in the current economic climate, given the onerous constraints and prevailing market dynamics.
Oyebode also touched upon the necessity of intercompany loans from the parent company, explaining that this was due to the domestic market’s inability to satisfy the company’s foreign currency requirements.
Oyebode expressed his confidence in a recovery in 2024, attributing this optimism to the company’s commitment to innovation and operational excellence.
Despite a promising revenue increase of 22.4 percent to N547.1 billion in FY 2023, Nestle still reported a loss after tax of N79.5 billion. The unfavourable result was largely attributable to a steep rise in net finance costs, which reached N227.8 billion.
