The financial performances of listed Nigerian manufacturers have revealed a challenging nine-month period for the sector with companies experiencing sharp declines in their return on equity (ROE), BusinessDay findings show.
Manufacturers are faced with foreign exchange crunch, high energy and logistics costs as well as insecurity and low government support.
Analysis by BusinessDay highlights a challenging period for Nigeria’s manufacturing sector, as four out of six listed companies of the country’s largest manufacturers reported notable drops in ROE, an essential metric reflecting how effectively these firms use shareholders’ equity to generate profit.
The surveyed firms include BUA Cement, Nigerian Breweries Plc, Cadbury Nigeria Plc, and Dangote Cement Plc.
Dangote Cement’s ROE dropped sharply from 20.00 percent in nine months of 2023 to 12.00 percent in 9M’24, and BUA Cement followed a similar trajectory, with ROE falling from 19.40 percent to 13.35 percent.
Nigerian Breweries Plc faced a challenging period, as the company reported a negative ROE of 173.23 percent, from an already negative 50.85 percent.
A declining ROE means that the company earns less profit for each dollar of shareholder equity while a negative ROE indicates the company is experiencing a net loss, meaning it’s not profitable.
However, despite the struggle to stay afloat, manufacturers like Unilever Nigeria Plc and Champion Breweries Plc were among the bright spots, with both companies reporting improvements in their ROE compared to the 9M’23.
Unilever Nigeria’s ROE rose to 13.55 percent from 11.08 percent in 2023, a testament to it sustained consumer demand and effective cost-control strategies. Champion Breweries turned a corner by posting a positive ROE of 0.19 percent after a negative 0.70 percent.
The Confidence Index of the chief executive officers (CEOs) of the Manufacturers Association of Nigeria (MAN) fell to 51.9 percent in the second quarter of this year.
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Francis Meshioye, MAN’s president, stated that the index declined from 53.5 percent recorded in the first quarter of 2024.
The MCCI serves as a gauge for assessing quarterly shifts in manufacturing activities, influenced by macroeconomic trends and government policies.
Meshioye highlighted that the contraction in the MCCI reflects the challenging times faced by the manufacturing sector.
He noted that all current indicators of manufacturers’ confidence have declined due to steep increases in electricity tariffs, aggressive hikes in interest rates, a high exchange rate, and ongoing inflationary pressures.
In 2024, manufacturers such as PZ Cussons Nigeria PLC, Kimberly-Clark Nigeria, and Diageo PLC had to shut down because of harsh economic conditions.
“These challenges limited our capacity to innovate, expand, create more jobs, and contribute meaningfully to the overall performance of the economy but by developing the manufacturing capabilities and leveraging its potential, we can reduce inflation and our overdependence on imports,” the president disclosed.
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