Companies’ exit will pull over N5tr from stock market, shareholders warn

the substantial currency devaluation and its repercussions on retained earnings for the period.

Nigerian Breweries, which is currently the 20th most valuable stock with a N334 billion market cap, constituting about 0.6 per cent of the stock market posted a net loss of N106 billion, after absorbing a foreign exchange ( forex) loss of about N153 billion.

The company’s gross profit declined from N213.33 billion to N212.61 billion, even as operating profit slowed down from N51.76 billion to N43.96 billion.

Net finance cost, however, jumped from N34.42 billion to N189.19 billion, due largely to forex depreciation. This wiped off the group’s net profit of N13.19 billion in 2022 with a net loss of N106.31 billion in 2023.

Also, Cadbury Nigeria, 53rd most capitalised stock with N35.7 billion capitalisation reported a loss of N27.6 billion, representing a decline of 2,228 per cent from N1.30 billion pre- tax profit recorded in the previous year.

The company’s operating profit was wiped out on the back of realised and unrealised foreign exchange loss of N36.93 billion incurred during the period.

Guinness Nigeria with N112 billion market capitalisation posted a full- year loss of N18.2 billion, representing a 216 percent decline when compared to N15.651 billion profit achieved in 2022.

Its loss before tax was N22.138 billion as against profit before tax of N23.674 billion in 2022. Consequently, the loss erased N33.6 billion of the company’s shareholders’ funds, which fell from almost N90 billion to N56.4 billion.

A source close to The Guardian disclosed that some of the multinationals are contemplating closing their businesses, paying off shareholders and relocating to a more favourable environment.

He pointed out that the capital erosion suffered by the firms is so massive that it will take several years for them to bounce back and resume payment of dividends.

Already, the stock market had lost about N130 billion from the exit of about four firms within eight months in 2023.

Should the five multinationals toe the same path, the stock market stands a risk of losing over N5 trillion from its overall market capitalisation.

The Guardian also learnt that most companies, especially in the manufacturing sector may be forced to raise capital from the market through debt instruments or equity to shore up their working capital given the volume of losses reported.

However, while an equity option will largely depend on the interest and liquidity position of its shareholders, the debt option would compel companies to raise capital at rates much higher than the risk- free rate which would put pressure on the profitability of these companies due to the high interest rate environment.

Head Research, FSL Securities, Victor Chiazor said companies that require foreign exchange to operate will have to immediately introduce a hedging contract on their dollar borrowing and obligations to avoid such losses in the future.