Nigeria’s largest fast-moving consumer goods (FMCG) companies are yet to recover from the blows of the 2020 pandemic as profits slowed last year.
Data compiled by BusinessDay show that Nestle, Nigerian Breweries, Dangote Sugar, Cadbury, Unilever and Nascon recorded a combined profit of N81.9 billion in 2021, a two percent decline from the N83.9 billion recorded in 2020.
This signals that inflationary pressures have weakened consumers’ wallets and constrained their purchasing power.
Further analysis shows that the profits of the companies have been declining since 2017, even before the pandemic.
“Sustained deterioration in the country’s macroeconomic indicators has weakened consumers’ real income due to high inflation, weaker economic growth, large-scale unemployment and increasing inequality.
These indicators have consequently left valuations of listed consumer companies depressed,” analysts at FBNQuest said.
Nigeria’s inflation rate fell marginally to 15.6 percent in January 2022 from 15.63 in December 2021. This is far from the CBN’s ideal single-digit inflation rate.
The last time Africa’s biggest economy recorded a single-digit inflation rate was in January 2016, with its headline rate pegged at 9.62 percent.
Ever since then, the apex bank has struggled to wriggle the economy out of its double-digit conundrum.
The country’s surging inflation rate has also increased the number of poor people to 90.1 million, and that number is expected to increase by 11 million by 2022, according to the World Bank.
Nigeria is not only the world’s poverty capital, ahead of India that has five times its population, its unemployment rate at 33 percent is the second highest globally after Namibia and it has the seventh highest inflation rate in Africa.
The economy grew by 3.4 percent in 2021, marking the fastest growth rate in seven years, but job-creating sectors like the manufacturing and agricultural sectors are still below their 2014 levels.
The agricultural sector grew 2.13 percent in 2021, compared to 4.3 in 2014, while the manufacturing sector grew by 3.35 percent as against 13 percent in 2014.
There appears to be no relief in sight for unemployment in Africa’s most populous nation. Without jobs, citizens will only get poorer and this will continue to affect the sales of FMCG companies.
Despite the depressed profits, the companies have seen their revenues surge to a record high. Their combined revenue jumped 25 percent to N773 billion in 2021 from N617 billion in the previous year.
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According to analysts at FBNQuest, these companies were able to increase the price of their products in 2021. A general price increase in global commodities also supported the price increases.
Nigeria Breweries Plc recorded the highest profit among the FMCG companies analysed, as the firm saw a 71.8 percent increase in net profit to N12.93 billion in 2021 from N7.53 billion in 2020.
Its revenue increased by 29.7 percent to N437.19 billion in 2021 from N337.01 billion in the previous year.
Nascon came in next with a nine percent growth in profit to N2.97 billion, compared to N2.69 billion in 2020. Its revenue surged 19 percent to N33.2 billion in 2021.
Nestle recorded a marginal profit growth of two percent to N40.04 billion in 2021 from N39.21 billion in the previous year, due to a surge in expenses such as finance cost, which increased to N12.08 billion from N4.43 billion in the comparable period.
Revenue grew by 22.55 percent to N351.82 billion from N287.08 billion in the periods under consideration.
Dangote Sugar, Unilever and Cadbury saw their profits plunge by 26 percent, 12 percent and 11 percent respectively in 2021.
On the outlook for 2022, FBNQuest expects the growth momentum to slow in 2022.
“We expect growth to bolster earnings in the first half but forecast a slowdown in the second half due to the upcoming 2023 elections.
We believe inflation, unemployment, and weakness in real income remain a challenge for the consumer. We do not expect any change to economic management that could improve general living conditions in Nigeria,” they said.
