Consumer goods firms’ distribution costs surged to N209 billion in September 2022, up 35 percent when compared to N154.4 billion in September 2021. The consumer goods firms under coverage for this analysis are NASCON, Nigerian Breweries, BUA Foods, International Breweries, Nestle, Cadbury, and Dangote Sugar.
“The haulage cost is a significant part of the overall distribution cost. Notably, it is a standard practice to use high-duty vehicles, which in turn use diesel fuel for the activity. In this case, the rise in the price of diesel is considered as an important part that has contributed in no small measure to increased cost of distribution,” Ayodeji Ajilore, an investment research analyst with ARM Securities, said.
In Africa’s biggest economy, the market price of diesel is currently at N820 per litre as against N800/ltr in September. This increase came despite the drop in Brent crude oil price, the international oil benchmark which declined by 33 percent from a high of $122 per barrel when the Russia-Ukraine war intensified, to less than $100 per barrel. Prior to the war, Brent stood below $80 per barrel while the price of diesel averaged N288.09 per litre.
Analysts say the rise in the price of diesel led to an increase in the consumer goods firms’ distribution costs. Distribution cost involves those expenses related to the transport of goods, and it includes the movement of goods to resellers and customers, transport fees and tolls, warehousing costs and fleet maintenance cost of transport vehicles.
NASCON, Nigerian Breweries, and BUA Foods recorded 74.3 percent, 46 percent, and 31.7 percent year-on-year increase in their distribution costs. Also, Dangote Sugar recorded a growth of 3.6 percent while Cadbury, Nestle and International Breweries grew their distributions costs by 18.3 percent, 22 percent and 25 percent respectively.
“The price of diesel also a factor in the general rise in the prices of products which triggers inflation, especially for goods with inelastic demand,” Ajilore added.
Nigeria’s headline inflation hit 21.o9 percent in October, according to the National Bureau of Statistics.
Firm by Firm analysis
NASCON
NASCON’s distribution costs jumped a huge 74.3 percent to N8.42 billion in September 2022 from N4.83 billion in September 2021. The salt maker’s revenue increased by 62.4 percent to N40.6 billion in September 2022 from N25 billion in September 2021.
Cost of sales grew by 67.3 percent to N25.1 billion in September 2022 from N15 billion in September 2021. Profit for the period stood at N2.88 billion in September 2022, a 19.5 percent increase from N2.41 billion in September 2021. Basic earnings per share stood at N145 from N122 in the reviewed period.
Nigerian Breweries
Nigerian Breweries’ marketing and distribution expenses grew 46 percent to N101 billion in September 2022 from N69.1 billion in September 2021. The brewery’s net revenue jumped 27.2 percent to N393.4 billion in September 2022 from N309.3 billion in the comparable period of 2021.
Nigerian Breweries’ profit after tax stood at N14.7 billion in September 2022, indicating a 79.2 percent increase from N8.2 billion in September 2021. Basic earnings per share stood at N182 from N102 in the period reviewed.
BUA Foods
BUA Foods’ selling and distribution expenses increased by 31.7 percent to N10.3 billion in September 2022, up from N7.82 billion in September 2021. BUA Foods’ turnover rose to N289.8 billion, a 20 percent increase from N241 billion in
September 2021.
The cost of sales increased to N195.6 billion, up 23 percent from N158.8 billion in the comparable period in 2021. BUA Foods’ profit after tax climbed 17 percent to N68.7 billion in September 2022, from N58.7 billion in September 2021. Earnings per share rose to N3.82 from N3.26 in the comparable period.
International Breweries
International Breweries’ administrative, marketing and promotion expenses climbed 25 percent to N41.36 billion in September 2022 from N33.1 billion in September 2021. The brewery recorded revenue of N160.4 billion in the nine-month of 2022, representing a 25 percent increase from N128.4 billion in the comparable period of 2021.
The firm’s cost of sales climbed 14 percent to N113.4 billion in September 2022 from N99.6 billion in September 2021. Profit for the period was at N2.81 billion, down 80 percent from N14 billion in the comparable period. International Breweries’ basic earnings per share stood at N0.10 from N0.52 in the period reviewed.
Nestle Nigeria
Nestlé’s marketing and distribution expenses surged 22 percent to N43.4 billion in September 2022 from N35.6 billion in the comparable period of 2021. Nestlé’s revenue grew 27.4 percent to N333.4 billion in the nine months that ended September 2022 from N261.6 billion in comparable period of 2021.
The firm’s cost of sales increased by 35 percent to N216.2 billion in September 2022 from N160.3 billion in the comparable period of 2021. Nestle recorded a profit after tax of N40.15 billion in September 2022, indicating a 19.5 percent increase from N33.6 billion in September 2021. Basic earnings per share stood at N50.66 from N42.37 in the period reviewed.
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Cadbury Nigeria
Cadbury Nigeria saw its selling and distribution expenses surge by 18.3 percent to N4 billion in September 2022 from N3.38 billion in September 2021. The consumer goods firm saw its revenue jump 41.6 percent to N42.5 billion in September 2022 from N30 billion in the comparable period of 2021.
Its cost of sales rose to N34.1 billion in September 2022, indicating a 39.7 percent increase from N24.4 billion in September 2021. Cadbury’s profit for the period stood at N2.81 billion in September 2022, which indicates 86 percent increase from N1.51 billion in September 2021. Basic earnings per share stood at N149.97, down from N80.57 in the period reviewed.
Dangote Sugar
Dangote Sugar’s selling and distribution expenses climbed 3.6 percent to N557.8 million in September 2022, up from N538.2 million in September 2021. The consumer goods firm saw its revenue surge 47.4 percent to N288.3 billion in September 2022 from N195.5 billion in September 2021.
Dangote Sugar’s cost of sales grew to N230.8 billion in September 2022, up 45.4 percent from N158.7 billion in September 2021. The profit for the year increased to N24.8 billion, indicating a 60 percent increase from N15.5 billion in the period under review. Basic earnings per share amounted to N2.04 from N1.28 in the comparable period.
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