15 listed firms owe N3.6tn – Report

A total of 15 listed companies on the Nigerian Exchange recorded a combined debt of N3.62tn under non-current liabilities as of September 2024, reflecting a rise compared to N2.74tn in 2023, The PUNCH reports.

The figure indicates a 32.1 per cent year-on-year increase, according to their financial statements filed on the Nigeria Exchange Limited.

These non-current liabilities include deferred tax liabilities, lease liabilities, financial liabilities, loans and borrowings, employee benefit obligations, provisions, deferred income, long-service award obligations, retirement benefit obligations, and government grants.

These liabilities represent long-term financial commitments that the companies must settle beyond the current period, impacting their financial positions.

Non-current liabilities, also known as long-term liabilities, are financial obligations a company owes that are not due within the next 12 months. These liabilities typically include items like long-term borrowings, deferred tax liabilities, pension obligations, lease obligations, and bonds payable. They represent a company’s long-term financial commitments to creditors or other parties.

The companies in review include Dangote Sugar Refinery Plc, Dangote Cement Plc, Lafarge Africa Plc, Nestlé Nigeria Plc, Unilever Nigeria Plc, Flour Mills of Nigeria Plc, Cadbury Nigeria Plc, Nigerian Breweries Plc, Seplat Energy, BUA Foods Plc, TotalEnergies Marketing Nigeria Plc, Union Dicon Salt Plc, UAC of Nigeria Plc, Vitafoam Nigeria Plc, and Presco Plc.

Dangote Sugar Refinery Plc saw its non-current liabilities drop by 88.4 per cent from N412.07bn in 2023 to N47.77bn in 2024.

Dangote Cement Plc recorded a marginal decrease of 2.3 per cent in its debt profile, reporting N586.63bn in 2024 compared to N600.25bn in the prior year.

Lafarge Africa Plc experienced a substantial increase in its non-current liabilities, surging by 74.6 per cent to N65.24bn in 2024 from N37.36bn in 2023.

Nestlé Nigeria Plc reported a dramatic increase in its debt, jumping by 103.1 per cent from N369.17bn in 2023 to N749.76bn in 2024.

Unilever Nigeria Plc saw its non-current liabilities rise modestly by 5.8 per cent, reaching N8.46bn in 2024 compared to N8.00bn the previous year.

Flour Mills of Nigeria Plc reported a 7.0 per cent increase in its non-current liabilities, climbing to N301.04bn in 2024 from N281.29bn in 2023.

Cadbury Nigeria Plc maintained a relatively stable debt profile, with a slight increase of 1.1 per cent from N751.18m in 2023 to N759.71m in 2024.

Nigerian Breweries Plc recorded a sharp rise of 90.8 per cent in its non-current liabilities, which stood at N282.64bn in 2024, up from N148.12bn in the previous year.

Seplat Energy reported an 83.5 per cent increase in debt, rising to N1.48tn in 2024 from N807.11bn in 2023.

BUA Foods Plc posted an 18.6 per cent growth in its debt profile, with non-current liabilities increasing from N23.79bn in 2023 to N28.21bn in 2024.

TotalEnergies Marketing Nigeria Plc reported a moderate increase of 7.0 per cent in non-current liabilities, climbing to N11.25bn in 2024 from N10.52bn in 2023.

Union Dicon Salt Plc recorded a higher negative liability figure of N(70.77)m in 2024 compared to N(65.64)m in 2023, representing a 7.8 per cent decline.

UAC of Nigeria Plc witnessed a 36.9 per cent rise in its debt profile, reporting N9.13bn in 2024 compared to N6.67bn in 2023.

Vitafoam Nigeria Plc posted an astronomical surge in its non-current liabilities, jumping by 6,741 per cent from N51.34m in 2023 to N3.51bn in 2024.

Presco Plc recorded a 36.4 per cent increase in its non-current liabilities, rising to N49.06bn in 2024 compared to N35.95bn in 2023.

When contacted, the Chief Economist /Managing Editor of Proshare Nigeria, Teslim Shitta-bey, explained that the rising debt burden of Nigerian firms is influenced by multiple factors, including the Federal Government’s heavy borrowing and high interest rates.

According to Teslim, the cost of obtaining credit has become a significant issue for companies, particularly as borrowing costs soar. “The funds available are relatively expensive, making it difficult for companies to source affordable financing,” he stated.

He added that one notable issue is the difficulty companies face in accessing credit, with many firms resorting to borrowing from parent companies, especially international ones, to meet financial obligations. While this strategy offers a short-term solution, it comes at a high cost.

However, Teslim reassured that these challenges are not insurmountable. “It’s a tough situation, but companies can navigate these hurdles. It all depends on their ability to manage their debt and access funding strategically,” he said.

Addressing the broader picture of financial stability in the market, He pointed out that no company has entered the public market recently through an initial public offering; instead, they have opted for public introduction.

“When you talk about financial stability, many companies in the banking sector have reinforced their capital base, resulting in a lower debt-to-equity ratio,” he explained.

He stated that the oil and gas sector, however, faces a different challenge adding that large amounts of debt in this sector may seem problematic, but Teslim noted that if a company has large cash flows, debt may not be a deal breaker.

“Debt is manageable if the company can generate enough cash flow to service it,” Teslim remarked. “Companies with large cash flows are more resilient to debt, and it doesn’t necessarily indicate financial instability.”

Teslim stressed that companies’ free operating cash flow is a crucial indicator of their financial health. While some firms may be under cash flow pressure due to high debt levels, this does not necessarily indicate a lack of financial stability.

“Cash flow is king. If a company’s free operating cash flow is strong, it suggests they have the capacity to meet their financial obligations, regardless of how much debt they carry,” he explained.

For investors, the key metric remains the free cash flow, which demonstrates a company’s ability to meet its financial obligations in the long run.

“What matters for investors is whether a company can generate enough cash to cover its obligations and fund its operations. That’s where the real financial stability lies.”

Summing up, Teslim reiterated that while the high cost of debt and limited access to credit remain persistent issues, they are not fatal to a company’s financial standing, provided it manages its cash flow and operates with a long-term financing strategy.

“The situation may be challenging, but companies that are well-managed, with solid cash flow and a strategic approach to debt, can still thrive,” he concluded.

The PUNCH reports that the aggressive interest rate hike implemented by the Monetary Policy Committee of the Central Bank of Nigeria in an attempt to tackle inflation made manufacturers repay N1.595tn owed to Deposit Money Banks and other creditors in the first half of 2024.