According to THISDAY newspaper, two flour milling firms, Dangote Flour Mills Plc and Honeywell Flour Mills Plc, have lost N2.193 billion through the devaluation of the Naira, a development that affected the bottom lines of the companies.
The Central Bank of Nigeria (CBN) had last November devalued the Naira by moving the midpoint of the official window of the foreign exchange market from N155 to N168 to one United States dollar.
According to the apex bank, the devaluation of the Naira became inevitable as a result of reduction in government revenue from oil production and sales among other factors.
THISDAY checks showed the devaluation has begun to impact negatively on the companies that depend on imported raw materials for the production of their goods. Dangote Flour Mills and Honeywell Flour Mills, for instance, recorded a total of N2.193 billion as currency devaluation losses in their latest financial results.
Dangote Flour Mills suffered the highest loss of N1.290 billion recorded in for the first quarter (Q1) ended December 31, 2014. Similarly, Honeywell Flour Mills, recorded a currency devaluation of N903 million in its third quarter ended December 31, 2014.
The N1.29 billion loss suffered by Dangote Flour Mills led to N2.920 billion loss after tax for the period. The company had ended the period with gross profit of 1.167 billion, compared with N459 million recorded in the corresponding period of 2013. It also strived to reduce distribution, administrative and other expenses by 20 per cent from N2.65 billion to N2.108 billion. But the N1.29 billion currency devaluation loss made Dangote Flour Mills to end the period with a loss after tax of N2.92 billion compared with a loss of N2.806 billion in 2013.
For the Honeywell Flour Mills, the N903 million currency devaluation loss, led to a dip of 52 per cent in net profit for the Q3. The company had recorded a decline in operating profit from N7.76 billion to N6.95 billion. But the N903 million currency devaluation loss in 2014, as against none in 2013, made the company to end the period with an operating profit of N1.589 billion, down by 56 per cent from N3.639 billion posted in 2013.
Market operators said more companies who depend on imported raw materials for the manufacturing of their products will report currency devaluation losses.
CBN Governor, Mr. Godwin Emefiele, had said the combination of low accruals into the nation’s foreign reserves, owing to falling oil prices at the international market; continual depletion of the reserves; and high demand at the foreign exchange market made it difficult for the apex bank to continue to defend the Naira, hence the devaluation.