BUA Foods Plc, Unilever Nigeria Plc, and Dangote Cement Plc recorded an increase in their earnings in the first quarter of 2024 despite the mounting economic headwinds that dampened the production capacity of many businesses making them incur huge losses.
BusinessDay findings shows that the listed consumer firms recorded a rise in profits as a result of increased exports aided by the further devaluation of the naira and the local sourcing of raw materials for production.
According to the firms’ latest financial statements, Dangote Cement’s export revenue from Pan Africa countries rose by 201.2 percent to N381.3 billion from N126.4 billion and Unilever’s export sales rose by 62.7 percent to N784 million from N482 million.
“During the quarter, we intensified our emphasis on exports, dispatching seven ships from Nigeria to Ghana and Cameroon. As a result, our Nigerian exports surged by 87.2 percent, reflecting our commitment to expanding our presence in regional markets and capitalising on our export-to-import strategy,” Arvind Pathak, CEO of Dangote Cement, said.
He added that despite elevated cost pressures, increased borrowing costs, and a further currency weakening, the company’s first-quarter results reflected their commitment to navigating challenges effectively.
“Our top and bottom line witnessed a significant uptick facilitated by a mix of volume and pricing actions. Aggregated sales maintained its upward trajectory as our capacity expansion drive continues to yield notable gains,” Ayodele Abioye, managing director at BUA Foods said in a statement.
He said despite elevated input & output cost pressures and increased FX volatility, our first quarter results further re-iterated the resilience of our business model and the dynamism of our market approach.
“During the quarter, we expanded our product bouquet in a bid to penetrate new markets and fulfil the demands of our customers and consumers.”
Profit rises to N172bn in Q1
The firms combined after-tax profit rose by 12.6 percent to N171.9 billion in the first three months of 2024, up from N152.6 billion.
Others such as International Breweries Plc, Cadbury Nigeria Plc, Nigerian Breweries Plc, Nestlé Nigeria Plc, Dangote Sugar Refinery Plc, Champion Breweries Plc, and Guinness Nigeria Plc posted a combined loss of N388.6 billion. BUA Cement, Lafarge Africa Plc and Nascon Allied Industries Plc reported a decline in after-tax profit of 46 percent to N24.4 billion from N45.4 billion.
Further analysis reveals that BUA Foods recorded the highest 37.9 percent growth in after-tax profit to N55.8 billion, followed by Unilever with a 25.8 percent increase to N3.36 billion and Dangote Cement recorded 2.9 percent to N112.7 billion.
Unilever also reported a revaluation gain of N1.18 billion but BUA Foods and Dangote Cement had an FX loss of N27.29 billion and N63.77 billion respectively.
“These firms have more local production and BUA Foods and Dangote Cement significantly jacked up their prices,” Oluebube Nwosu, consumer goods analyst at Vetiva Capital, said.
He said by producing locally, the companies were able to reduce exposure to foreign exchange.
“It depends on how these manufacturers can do their product mix, like products they can increase the price on and have minimal volume decline and also products they can minimise FX input on,” Nwosu stated.
Bolade Agboola, an energy and consumer growth analyst at Chapel Hill Denham, said some of the companies remain profitable because of strategies put in place.
“They also don’t have the same level of exposure to FX volatility. These strategies include revenue growth strategy and for Dangote Cement, they also have operations outside Nigeria which they could use to hedge their exposure,” she added.
Since President Bola Tinubu announced petrol subsidy removal during his inauguration on May 29, pump prices have more than tripled to over N600, while the value of the naira has plunged following the floating of the currency.
Last June, the Central Bank of Nigeria merged all segments of the FX market into the Investors and Exporters window and reintroduced the willing buyer, willing seller model.
The liberalisation of the foreign exchange regime in June weakened the naira from N463.38/$ to N1,354.2/$ as of May 4, 2024. At the parallel market, the naira is being traded at around 1,410/$ as against 762/$ before the FX reform.
Analysts say the further devaluation of the naira coupled with rising interest rates led to increased operating costs for the companies, particularly the multinationals whose major costs are denominated in foreign currencies.
The naira suffered a near 30 percent devaluation this year following a 40 percent devaluation last June.
The naira devaluation put more pressure on the margins of companies already dealing with double-digit inflation rates and the weak purchasing power of cash-strapped consumers.
