It is difficult running a financially healthy company amid a tough and unpredictable macroeconomic environment.
But Nestle Nigeria has defiled all odds as it utilized its assets in generating higher revenue than peers as revealed in the third quarter filing of firms. An example from the table shows Nestle turns over assets at a faster pace.
For every Naira in invested in assets, Nestle generated N1.26 in sales, while Flour Mills, Nascon Allied Industries, Dnagote Sugar, and Dangote Flour generated asset turnover of N0.65, N0.64, N0.63, and N0.61 respectively.
Nestle’s return on equity (ROE) and net margin of 65.10 percent and 15.13 percent are the strongest in the industry.
Guinness Nigeria, Honeywell, and P Z Cussons have very low asset turnover as they struggled with sluggish sales while an low consumer purchasing power hindered customer from meeting their obligations.
Revenues of consumer goods firms in Africa’s largest economy has been shrinking as they are unable to hike price of key products in 2018 to fend off inflationary pressures.
Nigerians are getting poorer, which means they aren’t opening their purse string.
According to a recent World Bank data, 92.10 percent of Nigerians live at below $5.50 a day. The reality is that most people cannot afford to buy a packet of Spaghetti or proteins.
Nigeria with a population of 180 million people has 87 million people, nearly half its population, in extreme poverty; as high inflation environment continues to erode discretionary income.
The cumulative average net profit margin of the 13 firms under our coverage fell to 3.91 percent in September 2018 from 4.67 percent the previous year.
Nigerian Breweries recorded its first quarter loss in decades, albeit stiff competition from rival company- International Breweries- contributed to the beer makers’ woes.
Other challenges bedevilling consumer firms are: insecurity in the northern part of the country, decrepit infrastructure, high incidence of smuggling, counterfeiting locally manufactured products, and the menacing grid lock at the Apapa Ports have made it practically difficult for firms to make profit or bolster margins as amid sky high cost of production.
