First Aluminium Plc is gaining momentum as sales stride amid cheap imports from China that undermines the growth of the sector.
Industry analysts say some of the cheap Aluminium from China is not properly levied and by the time they are brought into the country they are much cheaper than the locally produced ones.
Aluminium product standard is 0.03 millimeters; however some roofing sheets from China which are less than the required standard have found their way into the Nigeria markets.
For the first nine months through September 2015, First Aluminium sales increased by 15 percent to N7.74 billion from N6.56 billion in the same period of the corresponding year 2014 despite the cannibalization of sales by some Asia countries.
However, the Nigeria roofer succumbed to some of the challenges facing manufacturers in Africa’s largest economy as production costs swelled on the back of huge energy costs.
The business of aluminum roofing is capital intensive and there has to be a level playing ground, according to an industry analyst who doesn’t want his name mentioned.
Apart from a fall in oil price by more than 60 percent that led to slower economic growth, daily blackouts and poor transportation system makes it difficult for manufacturers to be on a growth trajectory.
Economic growth slowed by 2.4 percent in the second quarter while manufacturing contracted by 3.8 percent, after a 14 percent expansion a year earlier.
“Power is the biggest problem for Nigeria,” said Yvonne Mhango, a Johannesburg-based economist at Renaissance Capital. “You have the few existing manufacturers having to basically build their own power plants in order to produce. That’s an enormous additional cost that at the end of the day is passed down to consumers.”
As a result of huge energy costs as power from the grid remains unreliable, First Aluminum’s net income fell by 28 percent to N25.37 million while cost of sales increased by 16 percent to N7.21 billion in 2015 from N6.0 billion last year.
First Aluminum’s cost of sales ratio was as high as 93.15 percent in the period under review from 91.50 percent last year. This means the company spent N93.15 to produce every N100 unit of product sold.
The cost of generating power to run our production is too high and so we have to put up a plant in Abeokuta and another in Ota, according to Jinesh Chandra Dugad, Managing Director of Tower.
“Percentage of cost on power varies from one industry to another. But, like ours, where the large volume of power is required, 40 percent of our cost goes into power generation,” said Dugad.
