Economic crisis bites as Honeywell net income drops 66.56 percent

The economic challenges befalling companies in Africa’s largest economy is biting harder as Honeywell Nigeria Plc, a major player in the fast moving consumable goods sector recorded a 66.56 percent drop in the year ended March 2015.

Profit was N1.12 billion in 2015 compared with N3.35 billion the previous year. Sales decreased 10.94 percent to N49.05 billion.

Industry players were expecting a weak performance from the company as insecurity in parts of the country and the tough operating environment makes it harder for firms to thrive.

The Nigeria miller had complained bitterly about the security challenges in the north part of the country which it said has negatively impacted sales volumes.

It must the noted that these areas affected by the insurgency constitute close to 15 percent of population that consumes pasta, a meal popularly known as Talia in the Hausa dialect.

Analysts say the high interest environment, devaluation of the naira that spiral up the costs of raw material imported, continued rise in inflation and weak consumer spending worsened by delay in payments of salary in the public sector are holding back the growth of consumer goods firms in Africa’s largest oil producer.

An industry source who preferred to speak anonymously said banks charge as much as 26 percent interest on loans.

The Central Bank of Nigeria (CBN) increased the interest rate to 13 percent from 12 percent previously.

Nigeria’s consumer inflation rose by 0.2 percentage points to 9.2 percent in June compared with the same month last year, its highest rate since February 2013.

This means less money in the pocket of consumers to buy consumable goods. 

Honeywell’s cost to income ratio was as high as 0.84 percent, which is higher than the 0.81 percent recorded last year.

This means for every unit of goods produced, the company spent 0.84 percent as huge energy and material costs continues to swell production costs.

The company’s operating expenses were up 5.12 percent.

Honeywell is located in Apapa, a suburb of Lagos notorious for menacing gridlocks that disrupts business operations.

The company’s net margin, a measure of profitability and efficiency reduced to 2.28 percent in 2015 from 6.09 percent last year. Gross profit margins were down to 15.30 percent in the period under review as against 18.97 percent last year.

Gross profit fell by 28.22 percent to N7.50 billion in 2015 compared with N10.45 billion in 2014. Total assets increased by 6.43 percent to N67.94 billion as against N63.83 billion in 2014.

Honeywell’s share price closed at N3.10 on the floor of the exchange while market capitalization was N24.58 billion.

BALA AUGIE