Consumer goods firms’ operating profit surges to N130bn in H1 -

Nigeria’s consumer goods firms recorded a huge increase in operating profit which rose by 91.6 percent to N130.18 billion in the first half of 2022, up from N67.92 billion in the same period of 2021.

According to Investopedia, a company’s operating profit is its total earnings from its core business functions for a given period, excluding the deduction of interest and taxes. It also excludes any profits earned from ancillary investments, such as earnings from other businesses that a company has a part interest in. An operating loss occurs when core business income ends up being lower than expenses.

Tajudeen Ibrahim, director of research and strategy, ChapelHill Denham stated that “the increase in operating profit is as a result of higher prices of their products. There was a price increase during the reviewed period.”

“The pressures from energy price, security challenges, and other challenges contributed to pressure on the consumer goods firms’ expenses. Some firms implement price increase while others reduced volume and sold at the same price. Some firms had higher volumes because they penetrated into more markets to boost revenue growth and underpin their operating profit,” Ibrahim said.

Nigerian Breweries, Nestle, and Dangote Sugar drove the increase in operating profit with 38.5 percent, 26 percent, and 12.6 percent respectively against the benchmark as determined by the consumer goods firms’ attribution analysis.

Further, International Breweries contributed 11.9 percent to the benchmark of the firms while Unilever contributed 4.6%, UACN, 2.9%, NASCON, 2.7%), and Champion Brewery, 0.9%.

Ayodeji Ajilore, an investment research analyst at ARM Securities said, “In the period we observed that some of the sampled companies did raise prices across their product lines which led to improved margin, while others were able to slow their operating cost, which jointly led to improved aggregate operating profit among the selected companies.”

Firm by firm Analysis

Nigeria Breweries

Nigeria Breweries’ operating profit jumped 80 percent to N35.84 billion in H1’22 from N19.92 billion in H1’21. The firm’s revenue, also grew to N274.1 billion, a 31 percent increase from N209.2 billion in the first half of 2021.

The cost of sales of the firm climbed to N155.3 billion in H1’22, up 18 percent from N131.3 billion in H1’21. Gross profit surged to N118.7 billion in the first half of 2022, a 52 percent increase from N78 billion in the first half of 2021. Finance income jumped a huge 155 percent to N228.7 million in H1’22 from N89.6 million in H1’21.

Nestle

Nestle’s operating profit rose to N46.18 billion, a 27.1 percent increase from N36.33 billion in the first half of last year. Nestle’s revenue grew by 30 percent to N222.4 billion in the first half of 2022 from N171.4 billion in the first half of 2021.

Cost of sales increased to N142.2 billion in H1’22, a 35 percent increase from N105 billion in H1’21. Gross profit grew to N80.2 billion in the first half of 2022, up 21 percent from N66.4 billion in the first half of 2021.

Finance income was up by a huge 916 percent to reach N4.52 billion in the first half of 2022 from N444.6 million in the same period of last year.

Dangote Sugar

Dangote Sugar’s operating profit climbed 45.3 percent to N34.12 billion from N23.48 billion in the first half of 2021. Revenue grew 40 percent to N185.4 billion in the first half of this year from N132 billion in the same period of 2021.

Also, the cost of sales climbed 42 percent to N146.6 billion in the first half of 2022 from N103.3 billion in the first half of 2021. Gross profit grew to N38.8 billion in the first half of 2022, a 38.6 percent increase from N28.6 billion in the corresponding period of 2021.

Finance income jumped to N1.97 billion, indicating a massive 290 percent increase from N504.4 million in the corresponding period of last year.