Four listed manufacturers in the consumer goods industry recorded an improvement in their financial performance last year despite mounting economic headwinds that dampened the production capacity of many businesses.
Data compiled by BusinessDay from the firms’ latest financial statements show that the combined after-tax profit of NASCON Allied Industries Plc, Unilever Nigeria Plc, BUA Foods Plc and Dangote Cement Plc increased to N589.4 billion from N483.6 billion in 2022.
“These firms have more local production and BUA Foods and Dangote Cement significantly jacked up their prices,” Oluebube Nwosu, consumer goods analyst at Vetiva Capital, said.
He said by producing locally, the companies were able to reduce exposure to foreign exchange.
“It depends on how these manufacturers can do their product mix, like products they can increase the price on and have minimal volume decline and also products they can minimise FX input on,” Nwosu added.
Bolade Agboola, an energy and consumer growth analyst at Chapel Hill Denham, said some of the companies were able to remain profitable as a result of strategies put in place.
“They also don’t have the same level of exposure to FX volatility. These strategies include revenue growth strategy and for Dangote Cement, they also have operations outside Nigeria which they could use to hedge their exposure,” she added.
Many firms, however, took a beating from the economic challenges. Cadbury, Nigerian Breweries, Nestle, International Breweries, and Dangote Sugar posted a combined after-tax loss of N346.7 billion last year.
In 2022, Cadbury, Nigerian Breweries, Nestle, and Dangote Sugar had an after-tax profit of N117.4 billion while International Breweries posted a loss of N21.6 billion.
BUA Cement recorded a profit of N69.45 billion, down from N101.0 billion. Lafarge Cement’s profit fell to N51.1 billion from N53.7 billion.
Since President Bola Tinubu announced petrol subsidy removal during his inauguration on May 29, pump prices have more than tripled to over N600, while the value of the naira has plunged following the floating of the currency.
Last June, the Central Bank of Nigeria merged all segments of the FX market into the Investors and Exporters window and reintroduced the willing buyer, willing seller model.
The naira has depreciated significantly against the dollar and other major foreign currencies since then.
The official exchange rate fell from N463.38/$ to N1382.9/$ as of March 26, 2024. At the parallel market, the naira is N1,350/$ from 762/$.
Rising inflationary pressures in recent months have weakened the purchasing power of cash-strapped consumers, even as businesses grapple with higher operating costs.
Data from the National Bureau of Statistics shows that Nigeria’s headline inflation rate rose for the 14th consecutive time in February to 31.70 percent from 29.90 percent in the previous month.
Food inflation, which constitutes 50 percent of the inflation rate, rose to 37.91 percent from 35.41 percent.
Nigeria’s rising inflation has forced many small businesses to close shop, worsening the country’s unemployment situation. Its unemployment rate rose for the second straight quarter to 5.0 percent in the third quarter of last year from 4.2 percent in the previous quarter.
BusinessDay reported recently that 11 consumer firms sold fewer goods on credit last year compared to 2022 as the rising inflationary pressures impacted their financial performance.
The latest financial statements of the firms show that the total trade and other receivables increased by 40 percent to N843.8 billion from N602.5 billion. The growth is lower than the 74.2 percent increase recorded in 2022.
“No manufacturer wants to sell goods on credit again because the worth of collecting money back after it has been sold on credit won’t be the same as a result of inflation which will have reduced the value of the money,” Femi Egbesola, national president of the Association of Small Business Owners of Nigeria, said.
He said the raw materials cost may have increased when the debtors eventually pay for the goods bought on credit.
“More companies have dropped down on credit sales. In the same vein, the Micro, Small, and Medium Enterprises in their value chain supplying these companies do not collect local purchase orders again but will rather supply and get paid,” Egbesola said.
He added that in the past, most supplies were based on stipulating 30 days, 60 days, or 90 days payments. “No one is doing it in this system because prices are not stable and they can’t project and plan with the type of inflation we have at the moment.”
