Snapshot of consumer firms’ Q3 performance

Firms operating in the Nigerian Fast Moving Consumable Goods (FMCG) industry have been operating in a tough environment characterised by high cost of borrowing, huge infrastructure deficits, and political unrest that disrupts and hinders growth.

The third quarter (Q3) financial results of firms in the FMCG sector that have released results so far show slow growth at the top- and bottom-line level.

It should be noted that Nigeria has a huge consumption population and rising middle-class.

Unimpressive Q3 performance

Based on our analysis of the Q3 financial results of these firms, we observed that four out of the seven companies analysed fell off the cliff as they suffered declined in both profits and revenues.

Cadbury Nigeria plc, a major player in the FMCG sector, had sales drop by 12 percent and 57 percent dip in profit. Unilever Nigeria plc did not fare better as sales fell by 4 percent in the review period and profit shrank 48 percent.

Dangote Sugar Refinery, producer of sweetener, also fell off the cliff as sales dropped 5 percent and profit followed suit with 5 percent drop.

The cumulative revenue of the seven firms for the first nine months through September 2014, rose by a mere 2 percent to N644.94 billion compared with N633.53 billion the preceding year. Average gross margin, net margin, and cost margin were 31.37 percent, 21.50 percent and 70.42 percent, respectively.

The cumulative after tax profit fell by 3 percent to N57.56 billion in Q3, from N59.56 percent in the previous period as huge operating and input costs continues to spiral.

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Insurgency crimping growth of firms

We are of the view that an end to the unrest in the Northern part of the country will help bolster performance of firms operating in that region.

Nigeria Breweries our top pick

Despite a low single-digit growth in sales, Nigeria Breweries, the largest brewer by market value, outperformed peers in the industry as it recorded growth at both the top- and bottom-line level. The firm recorded a 2 percent and 11 percent growth in revenue and profit.

Patrick Atuanya & Bala Augie