The profit margins of three listed paint manufacturers in Nigeria dropped to 12.7 percent in the first six months of 2024 from 15 percent in the same period of 2023, data compiled by BusinessDay shows.
Profit margin is a financial ratio that measures the percentage of profit earned by a company in relation to its revenue. Expressed as a percentage, it indicates how much profit the company makes for every dollar of revenue generated
The firms analysed are Berger Paints Plc, Chemical and Allied Products (CAP) Plc, and Meyer Plc. The figures indicate that for every N100 in sales, the firms generated a profit of 12.7 percent, while the remaining 87.3 percent covered costs.
Experts say the rising inflation in the first half of the year reduced consumers’ purchasing power, leading to a decline in profit margins.
Further breakdown of the statement indicates that their combined cost of sales gulped 65.7 percent of the firms’ profit in H1.
The manufacturers’ total profit rose to N2.78 billion from N2.14 billion and the cost of sales increased by 57 percent to N14.3 billion from N9.1 billion.
Since the beginning of the year, the Central Bank of Nigeria intensified its efforts to fight the country’s inflation rate which is at a record high by increasing the country’s benchmark interest rate, known as the monetary policy rate.
Read also: Berger Paints’ finance cost jumps more than 32-fold to N21m
Last July, the apex bank raised its monetary policy rate for the third straight time by 50 basis points to 26.75 percent in a bid to fight inflation, defend the ailing naira, and foster a favourable climate for foreign investment.
That takes the total hikes since February to a combined 800 basis points. The jumbo interest rate hikes are expected to take a toll on economic growth in the second quarter, according to multiple economists and analysts.
According to the latest data from the National Bureau of Statistics, inflation declined to 33.40 percent in July 2024 from 34.19 percent in June 2024. On a month-on-month basis, headline inflation also slowed to 2.28 percent in July 2024 from 2.31 percent in June 2024.
Analysts had earlier predicted Nigeria’s high headline inflation to moderate in July based on the high base effect from last year, the federal government’s 150-day-free import duty effect on food inflation, and the stability of the naira in recent days.
Read also: Meyer’s full-year profit drops 40% to N235m
Analysis of individual firms
Berger Paints
Berger Paints reported a revenue of N5.01 billion, up from N3.5 billion
The company’s selling and distribution cost rose to N303 million from N132 million while its administrative expenses rose to N1.02 billion from N662 million.
It recorded an after-tax profit which fell to N82 million from N299 million.
CAP
CAP, a paint and coating company in Nigeria, reported an increase in profit of N1.79 billion from N1.28 billion.
It also witnessed a 60.8 percent growth in revenue, to N15.6 billion from N9.7 billion.
The company’s selling and distribution cost rose to N1.5 billion from N882 million while its administrative expenses rose to N2.6 billion from N1.6 billion.
Meyer
Meyer, a paint maker based in Lagos, reported a profit of N126 million, up from N57 million. The company saw its revenue rise to N1.32 billion from N1.01 billion.
Operating expenses, which comprised administrative, marketing, and sales costs, stood at N398 million, a 27 percent increase from N311 million.
