Some consumer goods firms have stayed afloat even as their peers grappled with deteriorating margins brought on by a myriad of challenges.
Of the 10 companies under our coverage, Only Cadbury Nigeria Plc, Nestle, and Flour Mills recorded profit expansion, thanks to sales growth, cost cuts, and a reduction in finance charges.
The three winners are able to turn each Naira invested in sales into higher profit, but their stocks, just like their rivals, have remained beaten down.
Cadbury’s third quarter net income surged by 246.15 percent, Nestle (+11.24 percent), and Flour Mills (+16.45 percent), according to data gathered by BusinessDay.
On the other hand, Nigerian Breweries recorded a 17 percent reduction in profit; International Breweries, (-130); Honeywell Nigeria, (-14.80 percent); Pz Cussons, (-12.10); Dangote Sugar (-435.15 percent), and (-54.25 percent).
International Breweries, and Guinness, fell off the cliff as they recorded losses of N16.45 billion, and N370.10 million respectively.
Dangote Flour Mills- a firm that has been incurring recurring loss- had been sold by its Billionaire owner Aliko Dangote before it was delisted from the bourse. Olam International had paid N120 billion as purchase consideration for the miller.
Consumer goods firms are feeling the pang of an economic downturn than any other sector in Africa’s largest economy as consumers have refused to open their purse strings.
The cumulative net profit of the 10 largest consumer goods firms that have released third quarter results showed net income fell by 28.92 percent to N54.96 billion, from N77.33 billion as at September 2018, according to data gathered by BusinessDay.
That compares with a 20.17 percent drop in 2018/17 financial year, but the bottom line reached an all-time high of +189.12 percent in 2017/2016, when a price hike across product brand help compensate for rising cost of production.
Combined sales followed the same downward trajectory as it increased by 1.0 percent to N1.10 trillion as at September 2019, this compares to 7.51 percent drop in 2018/17, but it increased by 30.71 percent in 2017/2016 financial year.
The latest GDP figures show the sector is a laggard, and the outlook continues to be bleak.
According to the National Bureau of Statistics (NBS), real GDP expanded by 2.28 percent in the third quarter, faster than the revised figures of 2.10 percent for the second quarter (Q2) of 2019.
However, the trade sector, which contributes. 15.2 percent to the overall GDP recorded its second consecutive contraction, down by 1.5 percent in the third quarter (Q3) of 2019.
The outlook for consumer goods industry is bleak as a hike in Value added Tax (VAT) to 7.50 from 5 percent by the Federal Government will squeeze consumer wallets.
Experts have warned that an increase in excise duties on carbonated drinks will hurt companies’ margins as they will find it difficult to pass on the cost to a beleaguered consumer.
The decision by Federal Government to close the borders (which is responsible for spiralling inflation) has hindered many companies from shipping their products in and out of the country.
Data from the National Bureau of Statistics (NBS) revealed that Nigeria’s consumer inflation rose by 36bps to 11.61 percent in October, representing a 17-month high.
Unemployment rate is at an all-time high of 23 percent.
