During Nestle’s recent Annual General Meeting held in Lagos, stakeholders expressed concerns regarding this substantial rise in the company’s liabilities.
Concerns Raised Over Nestle Nigeria’s Liabilities and Intercompany Loans
During the release of Nestle Nigeria’s annual report, a shareholder expressed concerns regarding the company’s liabilities and the accumulated interest on its loans. Specifically, attention was drawn to the intercompany loans taken by Nestle Nigeria.
According to the annual report, Nestle Nigeria disclosed that its unsecured bank loans as of December 31, 2022, amounted to N8.293bn, a significant increase from N431.943m in 2021. Additionally, loans from related parties rose to N147.006bn from N76.432bn in 2021.
Nestle provided further details about these loans, mentioning that the bank loans and borrowings were secured by a negative pledge on the company’s assets, aligning with their respective exposures. The loan contracts did not specify a fixed payment period, and repayment was contingent upon the availability of foreign exchange.
Among the loans, a $100m facility was approved for Nestle Nigeria by Nestle S.A. in April 2020, with a seven-year tenor inclusive of a two-year moratorium period for interest payments only. Furthermore, an additional $100m was received from Nestle S.A. in September 2020.
Moreover, as of December 31, 2022, the import trade obligations for Letters of Credit raised under import finance facilities from banks totaled NGN 8.293bn.
Nestle Nigeria’s Interest-Bearing Liabilities Surge to N155bn, Raising Stakeholder Concerns
According to the 2022 annual report and accounts of Nestle Nigeria Plc, the consumer goods manufacturer experienced a significant increase in its total interest-bearing liabilities. The liabilities rose from N76.864bn in 2021 to N155bn by the end of the 2022 financial year, indicating a growth rate of 102.05%.
During Nestle’s recent Annual General Meeting in Lagos, stakeholders expressed concerns regarding the company’s liabilities and the accumulated interest on its loans. One shareholder specifically highlighted the intercompany loans taken by Nestle Nigeria.
In the annual report, Nestle Nigeria provided details about its loans. The company stated that its unsecured bank loans as of December 31, 2022, amounted to N8.293bn, a substantial increase from N431.943m in 2021. Additionally, loans from related parties rose to N147.006bn from N76.432bn in 2021.
Nestle clarified that the bank loans and borrowings were secured by a negative pledge on the company’s assets, aligning with their respective exposures. The loan contracts did not specify a fixed payment period, and repayment was contingent upon the availability of foreign exchange.
Among the loans mentioned, Nestle received a $100m facility approved by Nestle S.A. in April 2020, with a seven-year tenor inclusive of a two-year moratorium period for interest payments only. Furthermore, an additional $100m was received from Nestle S.A. in September 2020.
Moreover, as of December 31, 2022, the import trade obligations for Letters of Credit raised under import finance facilities from banks totaled NGN 8.293bn.
In response to shareholder concerns, the former Chairman of Nestle, David Ifezulike, attributed the borrowings to forex requirements. He explained that the company needed forex for machinery and parts, as they are not produced locally in Nigeria. Nestle relies on loans from banks and forex support from the parent company to meet these needs.
While Nestle strives to use local raw materials for most of its products, Ifezulike acknowledged that certain products still require forex. He emphasized the importance of developing a robust dairy industry in Nigeria, stating that the country needs a concentrated approach to dairy farming to enhance milk production.
Focusing on Nestle’s involvement in the dairy business, he expressed the company’s commitment to supporting the sector. He highlighted the significance of the Central Bank of Nigeria’s initiative to promote the dairy industry and expressed optimism that Nigeria’s dairy industry would grow, reducing the need for imports.
