Nigeria’s oldest publishing houses battle for market share

Academy Press Plc, one of Nigeria’s oldest publishing houses, gained more market share in its first quarter ended June 30, 2024, according to BusinessDay analysis.

The shares of other listed publishing houses, Learn Africa Plc and University Press Plc market, fell amid mounting economic challenges.

Market share is the percent of total sales in an industry generated by a particular company.

It is calculated by dividing the company’s sales over the period by the industry’s total sales over the same period, giving an idea of the size of a company to its market and competitors.

In the race for market share, Academy Press retained the top as it holds 86.81 percent of the share, higher than 68.94 percent reported in Q1 ended June 2023.

Read also: How filmmakers can tap million-dollar biopics market

However, Learn Africa and University Press experienced declines during the period. Learn Africa’s share dropped to 5.87 percent from 21.29 percent, while University Press fell to 7.32 percent from 9.77 percent.

These publishing giants have faced stiff competition in recent years from newer, more agile companies that are leveraging technology and innovative business models.

The rise of e-books, online education platforms, and self-publishing models has intensified the competition, as younger publishing firms adopt digital-first strategies that appeal to a tech-savvy generation.

A further breakdown of the firms’ financial statements shows that their total revenue fell to N2.13 billion in H1 of 2024 ended June 2024, from N2.8 billion in the same period of 2023.

To this end, the financial scorecard for these companies showed that despite the high cost of production and inflationary pressure which have driven the price of raw materials, particularly paper, the three listed Nigeria printing firms’ combined cost of sales fell to N906 million from N1.9 billion in H1 2023.

According to the National Bureau of Statistics (NBS), Nigeria spent N1.99 trillion on the importation of paper and its allied products in five years.

Data obtained from the NBS showed Nigeria’s importation of paper and its allied products grew by 39 percent to N573.1 billion in 2023 from N412.2 billion in 2022.

Further breakdown showed Nigeria’s paper imports gobbled up N328.9 billion in 2021, N188.6 billion in 2020, and N491 billion in 2019.

The CEOs Confidence Index report of the Manufacturing Association of Nigeria (MAN) showed the score of the pulp, paper, printing, and publishing sector fell to 49.6 points in the fourth quarter of 2022 from 50.9 points in the previous quarter.

“The score indicates a gross loss of confidence in the economy by manufacturers operating in the sectoral group,” MAN said.

Read also: Nigeria inaugurates ambitious carbon market plan

Similarly, the Central Bank of Nigeria (CBN) Purchasing Managers Index report disclosed that printing & related support activities contracted to 48.8 percentage point in August from 45.6 percentage point in July 2024.

The PMI index, which measures the performance of business activities, is based on changes in different aspects of respondents’ business activities.

An index above 50.0 points indicates an expansion in business activities while below 50.0 points indicates a contraction in business activities.

Olugbemi Malomo, national president of the Chartered Institute of Professional Printers of Nigeria, in an earlier report, lamented that the heavy reliance of the major spenders like the Independent National Electoral Commission (INEC) and the Universal Basic Education Commission (UBEC) on foreign printers is killing the local printing industry.

“The Federal Government should come up with a deliberate policy that would make its big spenders like the INEC and UBEC be part of the solution to local paper production,” Malamo said. “With 60 percent of Nigeria’s population in one school or the other and over 1. 2 billion books printed annually, imagine if all these papers are sourced locally,” he said.

Operating environment impacting profit margin

The Nigerian printing industry is facing shrinking profit margins due to the high cost of operating in the country’s challenging economic environment.

During the surveyed period, Academy Press reported an increase in its after-tax profit to N519 million, up from N38 million, resulting in a positive profit margin of 28.05 percent.

In contrast, both Learn Africa and University Press posted after-tax losses of N205 million and N164 million, respectively.

These losses led to negative profit margins, as their operational and production costs exceeded revenue. Learn Africa reported a negative profit margin of 164 percent, while University Press recorded a negative profit margin of 105 percent.

Read also: Sharafadeen, Oyo NASS member, empowers constituents with PoS, start-up capital

Working capital management

Data tracked by BusinessDay reveal that the three publishing listed firms accumulated a positive working capital of N6.9 billion in the first quarter ended June 2024.

Positive working capital refers to the situation where a company’s current assets exceed current liabilities. This indicates that the company has enough short-term assets (such as cash, inventory, or accounts receivable) to cover its short-term liabilities (such as accounts payable, short-term loans, or wages).

Between April and June, Nigerian printing houses’ working capital fell to N6.9 billion from N7.1 billion in the same period of last year.

Academy Press’s working capital was N661 million, up from N181 million. Learn Africa’s working capital fell to N3.4 billion from N3.8 billion, and University Press’s working capital also fell to N2.9 billion from N3.17 billion.

Negative cash generated from operations

Academy Press, Learn Africa, and University Press reported negative cash from their core business activities in H1 ended June 2024, findings by BusinessDay reveals.

The firms’ latest financial statements show that they posted a combined negative net cash of N1.08 billion as of June 2024.

University Press reported the highest negative cash from operations of N632 million, from N741 million, followed by Academy Press with N313 billion from a positive N199 million and Learn Africa Plc with N136 million from N595 million.

Israel Odubola, a Lagos-based economist, said that a decline/ negative in cash flow from operating activities typically means a company is generating less cash from its core business operations. It shows that the businesses across diverse sectors are struggling to generate adequate cash to maintain or grow their operations, he noted.

“With higher inflationary pressure and weakening naira, it means these companies are spending more money on operations from raw material procurement to maintenance, thereby reducing the amount of cash left over from core business activities,” he said.

Uchenna Uzo, professor of marketing at Lagos Business School, attributed these widespread losses to a combination of external and internal factors.

Read also: Nigeria to see capital inflows as Fed cuts rates

“Externally, global economic uncertainties and trade disruptions have had a ripple effect on Nigeria’s economy. Internally, policy inconsistencies, infrastructural deficits, and security concerns have exacerbated the situation.

“Rising production costs, supply chain disruptions, and reduced consumer spending power have significantly dented profitability. Major manufacturers, once robust and thriving, are now grappling with dwindling revenues and escalating operational expenses,” he added.

To show these companies’ efficiency in translating their revenue to cash, BusinessDay carried out an analysis using the operating cash flow margin.

However, the result from the analysis shows that operating cash flow margins by these firms declined year on year in the first quarter ended June.

An operating cash flow ratio analysis conducted by BusinessDay to measure the number of times a company can pay off current debts with cash generated within the same period shows that most of these firms are not generating enough cash to cover their current liabilities.

A number greater than one indicates that a company has generated more cash in a period than what is needed to pay off its current liabilities.

An operating cash flow ratio of less than one, on the other hand, indicates that the firm has not generated enough cash to cover its current liabilities.

Academy Press, Learn Africa, and University Press all reported a negative operating cash flow of 29.53 percent, 11.72 percent, and 38.77 percent, respectively.