Manufacturers’ credit sales growth slows on rising inflation

Eleven consumer firms sold fewer goods on credit last year compared to 2022 as the rising inflationary pressures impacted their financial performance, according to data compiled by BusinessDay.

The latest financial statements of the firms show that the total trade and other receivables increased by 40 percent to N843.8 billion from N602.5 billion. The growth is lower than the 74.2 percent increase recorded in 2022.

The firms are BUA Foods Plc, Unilever Nigeria Plc, International Breweries Plc, Cadbury Nigeria Plc, Nigerian Breweries Plc, Nestle Nigeria Plc, Dangote Sugar Refinery Plc, Dangote Cement Plc, Lafarge Africa Plc, Nascon Allied Industries Plc, and BUA Cement Plc.

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“No manufacturer wants to sell goods on credit again because the worth of collecting money back after it has been sold on credit won’t be the same as a result of inflation which will have reduced the value of the money,” Femi Egbesola, national president of the Association of Small Business Owners of Nigeria, said.

He said the raw materials cost may have increased when the debtors eventually pay for the goods bought on credit.

“More companies have dropped down on credit sales. In the same vein, the Micro, Small and Medium Enterprises in their value chain supplying these companies do not collect local purchase orders (LPOs) again but will rather supply and get paid,” Egbesola said.

He added that in the past, most supplies were based on stipulating 30 days, 60 days, or 90 days payments. “No one is doing it in this system because prices are not stable and they can’t project and plan with the type of inflation we have at the moment.”

Oluebube Nwosu, consumer goods analyst at Vetiva Capital, said: “The slowdown in the growth of trade and other receivables balances shows companies want to be careful of bad debt where people can’t pay because they don’t have the money and the company will have to write those off.”

Over the past nine months, the inflation rate in Africa’s biggest economy has accelerated to a record high largely on the back of the Federal Government reforms including the removal of petrol subsidy and naira devaluation.

Data from the National Bureau of Statistics, Nigeria’s headline inflation rate rose for the 14th consecutive time in February to 31.70 percent from 29.90 percent in the previous month.

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Food inflation, which constitutes 50 percent of the inflation rate, rose to 37.91 percent from 35.41 percent.

“Notably, out-of-season food commodities like beans, rice, tomatoes, and pepper have seen sharp price increases, driven by cost-push inflation factors, including forex translation costs. For instance, the price of imported rice has surged to N95,000 from N70,000, a 35.7 percent increase,” said analysts at Financial Derivatives Company Limited, led by economist Bismarck Rewane.

Bolade Agboola, a consumer goods analyst at ChapelHill Denham, said the relaxation in the credit policies of the companies has impacted the rise in trade receivables for manufacturers.

She said relaxation in the credit policies of the companies and customers who are unable to pay, given that tougher macroeconomic conditions have caused the slower growth in trade and other receivables.

Further findings from the companies’ statements revealed that BUA Foods’ trade and other receivables increased to N199.9 billion in 2023 from N119.3 billion in 2022.

Unilever’s trade and other receivables rose to N31.3 billion from N21.25 billion, while International Breweries’ trade and other payables grew to N209.5 billion from N151.6 billion.

Cadbury Nigeria’s trade and other receivables increased to N7.24 billion from N5.16 billion. Nigerian Breweries’ trade and other receivables grew marginally to N49.8 billion from N49.1 billion.

Nestle Nigeria’s trade and other receivables rose to N105.4 billion from N85.1 billion while Dangote Sugar Refinery’s trade and other receivables increased to N131.8 billion from N107.4 billion.

Dangote Cement’s trade and other receivables grew to N73.22 billion from N45.49 billion while Lafarge Africa’s trade and other receivables increased to N7.9 billion from N6.35 billion. NASCON trade and other receivables grew to N27.71 billion from N11.6 billion.

In terms of financial performance, Cadbury, Nigerian Breweries, Nestle, International Breweries and Dangote Sugar posted a combined after-tax loss of N346.7 billion last year.

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In 2022, Cadbury, Nigerian Breweries, Nestle and Dangote Sugar had an after-tax profit of N117.4 billion while International Breweries posted a loss of N21.6 billion.

BUA Cement recorded a profit of N69.45 billion, down from N101.0 billion. Lafarge Cement’s profit fell to N51.1 billion from N53.7 billion. Dangote Cement however recorded an increase in profit to N455.6 billion from N382.3 billion.