Thirteen manufacturers listed on the Nigerian Exchange Limited saw their production cost surge by 97 percent in the first half of 2024.
The firms analysed are Dangote Cement Plc, BUA Foods Plc, Nigerian Breweries Plc, Nestle Nigeria Plc, BUA Cement Plc, Lafarge Africa Plc, Dangote Sugar Refinery Plc, International Breweries Plc, Guinness Nigeria Plc, Unilever Nigeria Plc, Cadbury Nigeria Plc, Nascon Allied Industries Plc and Champion Breweries Plc.
According to the manufacturers’ latest financial statements, their combined cost of sales grew to N3.05 trillion in H1 from N1.55 billion in the same period of 2023.
“The increase in manufacturers’ production cost is driven by inflation and volatility in exchange rate even though there has been a bit of stability but at the beginning of the year the exchange rate was uncertain,” Uchenna Uzo, professor of marketing at Lagos Business School (LBS), said.
Read also: 48% customs duty hike seen pushing up production costs
He stated that the electricity tariff has gone up and manufacturers are feeling the effect of it.
“The cost of distribution has also gone up which has increased the production cost of manufacturers and they are looking for how to address it,” he stated.
He said the impact of continued production cost will mean more manufacturers will exit the business, mergers will go on, there will be layoff of staff and cutting down on wastage in the system because there will be more cost efficiency.
Bolade Agboola, consumer goods analyst at ChapelHill Denham, said higher inflationary environment and exchange rate challenges are the major factors for increased production cost for manufacturers.
Read also: Four drugmakers see 82% rise in production cost in three months
“Inflation and exchange rate is the major factor affecting the manufacturers production cost,” she said. “Exchange rate is a factor because most manufacturers import raw materials they use.”
“Most of the manufacturers are trying to reduce their exposure to FX which is by backward integration, changing business models to reduce their FX obligations,” Agboola stated, adding that these strategies by the manufacturers are positive and they have been trying to efficiently manage their operating cost.
She stated that the outlook for the manufacturing sector is positive given what the government is doing to stabilise FX rate.
“The outlook for the manufacturing sector is still positive that they will be able to manage and scale through this challenging period.
“They will remain profitable going forward just that it will require them to be more strategic and make decisions that will continue to support the bottom line,” she said.
Data from the National Bureau of Statistics shows that Nigeria’s headline inflation declined for the first time in almost two years to 33.40 percent in July from 34.19 percent last month.
Analysis of individual firms
BUA Foods
BUA Foods’ production cost increased to N453.9 billion from N188.1 billion.
Turnover grew to N672.4 billion from N320.9 billion.
After-tax profit increased to N130.9 billion from N95.2 billion
Administrative expenses grew to N10.1 billion from N5.01 billion and selling and distribution expenses increased to N18.4 billion from N12.9 billion.
BUA Foods is a Nigerian company based in Lagos. It is part of the Nigerian BUA conglomerate. Its business activities include the production, processing and distribution of food products through its sugar, flour, pasta, rice, and edible oils divisions.
BUA Cement
BUA Cement’s production cost increased to N254.7 billion from N114.9 billion
Revenue grew to N363.9 billion from N221.1 billion.
After-tax profit stood at N34.3 billion, down from N63.6 billion.
Administrative expenses grew to N11.2 billion from N6.13 billion while selling and distribution costs increased to N16.3 billion from N14.03 billion.
BUA Cement is a publicly listed firm headquartered in Nigeria, it produces and markets cement products in the country. It is the second largest producer in Nigeria after Dangote Cement.
Dangote Cement
Dangote Cement’s production cost increased to N833.3 billion from N383.1 billion.
Revenue grew to N1.76 trillion from N950.8 billion.
After-tax profit increased to N189.9 billion from N178.6 billion
Administrative expenses grew to N98.8 billion from N45.5 billion and Selling and distribution expenses increased to N304.5 billion from N153.2 billion.
Dangote Cement is a Nigerian publicly traded multinational cement manufacturer headquartered in Lagos. The company is engaged in the manufacture, preparation, import, packaging, and distribution of cement and related products in Nigeria, and has plants or import terminals in nine other African countries.
International Breweries
International Breweries’ production cost increased to N160.6 billion from N78.6 billion.
Revenue grew to N223.2 billion from N116.1 billion.
After-tax loss widened to N106.8 billion from N23.6 billion.
Administrative, marketing and distribution expenses grew to N48.2 billion from N36.1 billion.
International Breweries is a brewery in Nigeria. It began production in December 1978 with an installed capacity of 200 000 hectolitres per annum, this increased to 500 000 hl/a in December 1982.
Nigerian Breweries
Nigerian Breweries’ production cost increased to N320.1 billion from N165.1 billion.
Revenue grew to N479.8 billion from N277.4 billion.
After-tax loss widened to N85.2 billion from N47.6 billion.
Administrative expenses grew to N23.8 billion from N16.3 billion and selling and distribution expenses increased to N97.1 billion from N68.5 billion.
Nigerian Breweries is the largest brewing company in Nigeria. It serves the Nigerian market and West Africa.
Dangote Sugar Refinery
Dangote Sugar Refinery’s production cost increased to N277.5 billion from N144.6 billion.
Revenue grew to N295.6 billion from N202.8 billion.
After-tax loss increased to N144 billion from N27.9 billion.
Administrative expenses grew to N7.75 billion from N5.83 billion and selling and distribution expenses increased to N310.3 million from N303.6 billion.
Dangote Sugar Refinery is a household name in the sugar refining sector of the Nigerian Food and Beverage Industry. Our entry into the sugar business is dated back to the 1970s with the import and sale of sugar by our parent company, Dangote Industries Limited.
Read also: Here’s how Dangote Cement fared in first half of 2024
Nestle Nigeria
Nestle Nigeria’s production cost increased to N279.7 billion from N154.4 billion.
Revenue grew to N406.9 billion from N261.8 billion.
After-tax loss widened to N176.9 billion from N49.9 billion.
Administrative expenses grew to N13.3 billion from N6.19 billion and Marketing and distribution expenses increased to N50.9 billion from N40.3 billion.
Nestle Nigeria is a publicly listed food and beverage specialty company headquartered in Lagos. It’s mostly owned by a holding company based in Switzerland and has ties to the company Tolaram Group.
Champion Breweries
Champion Breweries’ production cost increased to N5.76 billion from N3.46 billion.
Revenue grew to N9.54 billion from N5.71 billion.
After-tax loss stood at N386.7 billion, up N29.07 billion.
Administrative expenses grew to N1.23 billion from N824.9 billion while selling and distribution expenses surged to N2 billion from N1.39 billion.
Champion Breweries is a Nigerian brewing company located in Akwa Ibom state. The company is the producer of Champion lager beer and Champ Malta.
Cadbury Nigeria
Cadbury Nigeria’s production cost increased to N41.85 billion from N25.38 billion.
Revenue grew to N51.44 billion from N35.6 billion.
After-tax loss narrowed to N9.72 billion from N14.5 billion.
Administrative expenses grew to N1.25 billion from N803.9 million and selling and distribution expenses increased to N3.39 billion from N3.36 billion.
Cadbury Nigeria is a food, sweets, and drink company headquartered in Lagos, Nigeria, and traded on the Nigerian Stock Exchange. Cadbury Nigeria Plc is a subsidiary of Mondelez International, one of the largest snacking companies in the world.
Lafarge Africa
Lafarge Africa’s production cost increased to N147.9 billion from N94.29 billion.
Revenue grew to N295.6 billion from N197.7 billion.
After-tax profit stood at N29.4 billion from a loss of N35.5 billion.
Administrative expenses grew to N16.8 billion from N11.2 billion and Selling and distribution costs increased to N53.6 billion from N40.3 billion.
Lafarge Africa is a building solutions company headquartered in Lagos and quoted on the Nigerian Stock Exchange. It is majorly controlled by the Holcim Group. Previously trading under the name of Lafarge Wapco Plc, the merger of Lafarge and Holcim and resulting consolidation of Lafarge’s assets in Nigeria and South Africa resulted in the name change to Lafarge Africa.
Nascon Allied Industries
Nascon Allied Industries’ production cost increased to N28.4 billion from N36.5 billion.
Revenue grew to N50.4 billion from N38.2 billion.
After-tax profit stood at N4.84 billion from a loss of N5.82 billion.
Administrative expenses grew to N3.12 billion from N2.02 billion while distribution cost increased to N9.85 billion from N8.25 billion.
Nascon Allied Industries is a Nigeria-based company that is engaged in the processing of raw salt into refined, edible, and graded salt. The Company’s products include salt, seasoning, and spices.
Read also: Nestle Nigeria invests N6bn to bridge technical skill, unemployment gap
Guinness Nigeria
Guinness Nigeria’s production cost increased to N208.03 billion from N151.3 billion.
Revenue grew to N299.5 billion from N299.4 billion.
After-tax loss widened to N54.8 billion from N18.2 billion.
Administrative expenses grew to N19.5 billion from N17.05 billion and Marketing and distribution expenses increased to N49.7 billion from N41.2 billion.
Unilever Nigeria
Unilever Nigeria’s production cost increased to N37.7 billion from N32.3 billion
Revenue grew to N63.9 billion from N13.1 billion.
After-tax profit stood at N4.44 billion, up from N2.76 billion.
Marketing and administrative expenses surged to N16.9 billion from N6.5 billion.
Unilever Nigeria is a publicly listed company with trading and manufacturing interest in the consumer goods market. In 2014, it was listed among the top 20 most valuable companies quoted on the Nigerian Stock Limited.
