FrieslandCampina highlights €63m exchange rate loss in Nigerian operation

Netherlands-based FrieslandCampina flagged up €63 million (N30.9 billion at N490.4/€1) in exchange rate losses in its Nigerian subsidiary as a pressure point for operating profit in 2022.

The expenditure constituted 22 per cent of the group’s operating costs last 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.

One of the worst performing currencies of the year, the naira plunged 37 per cent against the greenback as of 6 November, coming after Sri Lanka’s rupee and Ghana’s cedi on top of the pile.

“The company has a liability to exchange Naira to US dollars in the local market,” the dairy maker said in its 2022 annual report issued on Tuesday and seen by PREMIUM TIMES.

“This liability is entered into to meet international payment obligations. For this, higher costs are incurred compared to the official exchange rates in Nigeria,” it added.

Yet, the reverberations of the dollar shortage are visible beyond operating expenditure, with finance costs gulping as much as equivalent of €10 million in local currency.

That sum was part of the €63 million the group spent on servicing debt during the year.

FrieslandCampina Nigeria also obtained a N40 billion short-term facility to finance purchase of the dollars needed to settle its matured letter of credit obligations.

“From time-to-time US Dollars are sourced in Nigeria at a higher exchange rate than the official exchange rate, because of the currency restrictions.

“The difference is recognised in costs of goods sold. At the end of 2022, this exchange rate is 66% higher,” the document said.

FrieslandCampina N.V. holds a 67.8 per cent stake in the Nigerian subsidiary, which trades its shares over the counter at the NASD OTC Securities Exchange.

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The group revenue was up 22.4 per cent at €14.1 billion in the period under review, with profit leaping to €292 million from €172 million.

A separate financial report for its Nigerian operation is to be released soon.

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.