• Thursday, March 28, 2024
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BusinessDay

Honeywell, Fidson, Nascon boom on COVID-19 as brewers lose out

Honeywell

Companies producing essential products such as food and drugs have prospered in this COVID-19 era as they see higher margins in the first six months of the year due to increased patronage during the period.
Food makers, Honeywell and Nascon, grew sales by 39 percent and 17 percent in the first half of 2020, respectively, as patronage spiked on increased consumption and food donations to poor households by governments, NGOs and wealthy individuals.

Similarly, drug makers, Fidson and May & Baker, grew their sales by 12 percent and 0.5 percent due to increased demand for drugs at pharmaceutical stores and isolation centres.

However, brewers’ margins slumped on the back of government’s closure of bars, nightclubs and event centres where beer and alcoholic beverages get its biggest patronage.

“The lockdown period gave room for essential products which were very necessary at that time, especially the food and healthcare subsectors,” Ambrose Oruche, acting director-general, Manufacturers Association of Nigeria (MAN), says.

Oruche expects to see things returning to normal in the second half of the year after mixed performances among manufacturers in the first half.

Fidelis Ayabae, chairman of Fidson Heathcare plc, attributed the growth in margins of pharmaceutical companies to shift in the behaviour of consumers from non-essential to essential products.

“People no longer spend on non-essential things now. What they do mostly is to buy drugs for fear of COVID-19,” he said.

He told BusinessDay that although drug makers like him lost sales to hospitals due to a 50 percent drop in the number of hospital attendants, he recovered some of the losses in the retail end of the market.

“COVID-19 disrupted availability of raw materials and finished products, and disrupted the global supply chains. But what has happened is that we are reaping the fruit of our investments,” Ayabae, who is the chairman of the Pharmaceutical Manufacturers Group of the MAN, said.

Fisdon has invested over N9 billion in a six-line drug manufacturing plant at Sango-Otta, Ogun State, Nigeria.

Analysts say the classification of food and drugs as essential products during the five-week lockdown was a boost for their sales.

According to its half-year (H1) 2020 financial statement posted on the Nigerian Stock Exchange’s website, Fidson grew revenue by 12.3 percent to N8.2 billion in the H1 of 2020, from N7.3 billion in the same period of 2019, with its profit after tax rising by 82 percent to N500 million from N275 million in H1 2019.

Also, pharmaceuticals contributed 99 percent to May & Baker’s revenue base in H1 2020. Revenue grew to N4.07 billion in H1 2020 from N4.05 billion in H1 of 2019, representing 0.5 percent increase. However, its profit after tax moved up by 51 percent to N438 million in H1 2020, from N290 million in the same period of 2019.

For the food industry, Honeywell Flour Mills, a producer of flour and pasta, grew its revenue by 44 percent to N26 billion, from N18 billion in the corresponding period of 2019.

Similarly, Nascon, a member of Dangote Group producing salt, tomato paste and seasonings, was able to grow its revenue base by 17 percent to N14 billion, with  gross profit rising by 66 percent to N5.8 billion. Profit after tax grew by 3 percent to N1.48 billion.

During the pandemic, cement makers also grew their sales. Dangote Cement, a member of Dangote Group, grew revenue to N332 billion in H1 of 2020, from N328 billion in the corresponding period of 2019.

Dangote Cement also grew profit after tax by 17 percent to N174 billion in H1 of 2020, as against the N149 billion it recorded in the previous year. Similarly, BUA cement grew its revenue by 13 percent to N101 billion while its profit for the period grew by 13 percent to N34 billion.

According to analysts, cement makers were lucky as some state governments, organisations and individuals used the opportunity of the break caused by the pandemic to build infrastructure and houses.
“Contracts for several projects were on in several states during the pandemic, and cement makers benefitted from that,” Ike Ibeabuchi, a manufacturer, explained.

Makers of soaps, disinfectants and sanitizers also recorded a boom this period as many consumers made use of these items as preventive measures against COVID-19, said Obisike Nwachukwu, a medical practitioner and manufacturer of sanitizer.

With bars, events and night clubs shut, local brewers had it tough which reflected in their financials for the first half of the year; with the Nigerian Breweries experiencing revenue decline of 11 percent to N151 billion in H1 of 2020. Profit after tax declined by 58 percent, from N13 billion in the first half of 2019 to N5.5 billion in the same period of 2020.

Similarly, International Breweries experienced revenue decline of 12 percent, recording N60 billion in the first half of 2020 as against the N68 billion in the previous year. It further recorded N9.3 billion in its loss after tax, representing a 37 percent increase in its loss profile.

Producers of footwear, handbags and garments are also not excluded from the pinch of the pandemic. Aba-based footwear manufacturer Johnson Obasi, CEO, Johnsfrank Global Resources, in a telephone interview with BusinessDay, said that since the beginning of the pandemic sales in large and small volumes has been slow as people seek resources to protect themselves from the pandemic such as facemasks, and gloves.

He said this has forced him to move to protective items, producing between 700 and 1000 PPEs daily.

“Our fashion business in Aba was almost at the point of collapse as people were no longer interested in fashion items, but rather searched for protective items. To make matters worse, the imposed lockdown affected the movement of our products to other towns and countries, which left us stuck in the mud.”