Consumer goods firms are walking a tightrope as a surge in foreign exchange losses has squeezed profit margins for a sector looking to recover from the economic effect of the Russia/ Ukraine war.
Data sourced from the financials of the six biggest consumer goods firms showed a net foreign exchange loss of N445.17 billion in 2022, 253 percent higher than a net foreign exchange loss of N12.78 billion recorded in 2021.
“The hostile environment (security and infrastructure wise) has slowed down the actualization of the needed scale, a development which has led to sustained reliance on importations of input,” Ayodeji Ajilore, an investment manager at ARM Investment Managers said.
“Until an improved business operating environment is actualized, outsourcing of input will continue to burden the Naira. This ultimately will burden foreign exchange and impact the FMCG industry; since a significant chunk of the input in their production process gets imported,” Ajilore added.
The surveyed firms include Dangote Sugar Refinery, Unilever Nigeria, Nascon Allied Industries, Nestle Nigeria Plc, International Breweries, and Nigerian Breweries.
The consumer goods firms grew profit by 21.8 percent to N50.5 billion in 2022 from N41.4 billion in 2o21.
Dangote Sugar Refinery Plc
Dangote Sugar recorded an exchange loss of N1.89 billion compared to a gain of N1.99 billion in 2021.
“There were challenges faced in sourcing for an adequate quantity of foreign currencies from the official markets resulting in a slowdown of business operations when foreign currencies required to purchase production materials are not available,” the company said.
Dangote Sugar Refinery’s profit after tax increased by 148 percent to N54.74 billion in 2022 from N22.05 billion in 2021 on the back of increased sales and finance income.
The sugar producer reported revenue growth of 46 percent to N403.25 billion in the full year of 2022 from N276.1 billion in the same period of 2021.
Cost of sales stood at N311.3 billion in December 2022, up 38 percent from N225.8 billion in December 2021. The firm cost of sales took out 77 percent of Dangote Sugar’s revenue in the reviewed period.
Cash and cash equivalent grew 70 percent to N174.86 billion from N103 billion on the back of short-term deposits which stood at N151.7 billion in December 2022.
The proposed dividend for the full year of 2022 was N1.50 per ordinary share of 50kobo from the profit.
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Unilever Nigeria Plc
Unilever’s revenue grew by 25.5 percent to N88.5 billion in 2022 mainly driven by the home and personal care segment which contributed N46.1 billion while N42.6 billion was obtained from its food products segment in the full year of 2022.
Net exchange loss on translation of foreign currency denominated amounted to N363.17 million.
The company stated that the exchange loss was recognized on the supplier trade finance loan account.
“Due to a shortage of foreign currency, the company entered into trade financing arrangements with some local banks whereby the banks pay the amounts owed to foreign suppliers and thereafter receive a settlement through foreign currency allocations from the Central Bank of Nigeria in a bidding process,” the company said in its financials.
The company recorded an operating profit of N4.4 billion, up 549 percent from N0.7 million recorded in 2021.
Unilever recorded a gross profit of N31.1 billion for the year ended 31st December 2022 which was 53 percent higher than N20.3 billion reported for the same period last year.
The total revenue of N88.72 billion was driven
Unilever’s cost of sales increased to N57.24 billion, up 14 percent from N50.16 billion in the comparable periods.
The firm’s cash and cash equivalents at the end of the period rose to N68.17 billion, up 22.4 percent from N55.7 billion in the period reviewed.
Unilever’s basic and diluted earnings per share attributable to equity holders increased to N1.04 in the full year of 2022 from N0.59 in the same period of 2021.
Nascon Allied Industries
The salt maker recorded net foreign exchange losses which amounted to N368.69 million from a gain of N1.03 billion recorded in 2021.
“Foreign exchange differences arose from challenges faced in sourcing an adequate quantity of foreign currencies from the official markets resulting in a slowdown of business operations when foreign currencies required to purchase production materials are not available,” the company said.
Revenue grew by 76.6 percent to N58.8 billion in 2022 from N33.3 billion recorded in 2021; profit for the year stood at N5.47 billion from N2.97 billion recorded in 2021.
The cost of the sale saw an increase to N34.2 billion from N 21.3 billion recorded in 2021 on the back of an increase in raw materials consumed to N30.45 billion from N18 billion recorded in 2021.
Gross profit also saw an increase to N24.5 billion from N11.9 billion recorded in 2021.
Total cash and cash equivalents at the end of the year amounted to N13 billion from N7 billion recorded in 2021.
Nestle Nigeria Plc
The food and beverage company recorded a net foreign exchange loss which amounted to N7.85 billion from N4.73 billion recorded in 2021.
The company recorded a growth rate of 27 percent in revenue which amounted to N446.8 billion from N351.82 billion recorded in 2021.
Gross profit amounted to N155.76 billion was recorded at the end of the 2022 financial year, from N131.8 billion recorded in 2021.
Profit for the year under review stood at N48.97 billion from N40 billion recorded in 2021.
Cash and cash equivalents as of December 31 2022 amounted to N117.98 billion from N100.59 billion recorded in 2021.
International Breweries
Net foreign exchange loss stood at N8.36 billion in 2022, a 107 percent increase from N4.04 billion in 2021.
Revenue from local bought-in materials and services amounted to N75.7 billion, 42 percent of the total revenue reported by the firm while foreign bought-in materials and services stood at N104.6 billion which accounted for 58 percent of the total revenue.
International Breweries’ input cost rose to N175 billion in December 2022, the highest in five years as the firm records’ recurrent losses, BusinessDay analysis shows.
The brewery input cost recorded a 28.7 percent growth in 2022 from N136 billion in the full-year period of 2021.
Further analysis revealed that the firm has been recording losses which can be attributable to higher inflation as input cost surge as Nigeria’s headline inflation rate recorded double-digit growth of 21.34 percent in December from 21.47 in November
International Breweries reported a loss for the year of N21.6 billion from N17.7 billion while the loss incurred before tax stood at N26.8 billion from N19.8 billion.
Loss attributable to shareholders recorded by International Breweries amounted to N21.6 billion in December 2022, this is coming from N17.6 billion in December 2021 which led to N0.81 loss per share from N0.66 loss per share in the comparable period
International Breweries’ cash and cash equivalents increased to N36 billion in 2022, up 46 percent from N66.8 billion in 2021.
Nigeria Breweries
Net loss on foreign exchange transactions stood at N26.34 billion in December 2022, a 274 percent year-on-year increase from N7.04 billion in December 2021.
Nigerian Breweries Plc reported a 27 percent decline in profit before tax and grew profit after tax by 4.06 percent over a decline in tax expenses.
The brewery’s profit increased to N13.19 billion in December 2022, up 4 percent from N12.67 billion in December 2021.
The brewery’s total operating expenses jumped 31.6 percent to N163.98 billion from N124.6 billion in the entire year 0f 2021 due to the challenging operating environment and continuous focus of the brewery on brand visibility.
Nigerian Breweries’ cost of sales grew to N337.31 billion in December 2022, 22 percent increase from N276.87 billion in the preceding year. The increase in the firm’s cost of sales can be attributed to inflation, high energy price, and naira devaluation.
The firm reported a gross profit of N213.33 billion in December 2022, a 33 percent increase from N160.41 billion in December 2021.
“The company reported a 93.4 percent surge in net finance cost to N34.4 billion, following a 274.1 percent jump in net loss on FX transactions, which stemmed from its foreign currency payables,” CardinalStone said in a note.
Earnings per share stood at N158 in December 2022 from N157 in December 2021.
