A protracted government shut down of the borders is causing menacing pains to consumer goods firms who are unable to ship their products in and out of the country. Trucks belonging to Cadbury Nigeria Plc, Unilever Nigeria Plc, and Dangote Cement have been trapped at the border since last week Tuesday, sources tell BusinessDay.
“Travellers are allowed to move but trucks with products cannot move. If we are unable to deliver goods to customers on time, there will be high inventory of goods in the warehouse,” said the source.
A statement issued by the office of the Comptroller-General of Customs states as follows:
“As part of measures to secure Nigeria’s land and maritime borders, the Nigeria Customs Service (NCS) and the Nigerian Immigration Service (NIS), in collaboration with the Armed Forces of Nigeria (AFN) as well as the Nigeria Police Force (NPF) and other security and intelligence agencies will be conducting a joint border security exercise, codenamed “EX-SWIFT RESPONSE”
Analysts warned that the disruption from a border slowdown will have cascading effects, hammering consumers and threatening margins of companies grappling to breakeven in a harsh and unpredictable macroeconomic environment.
The goal of manufacturers, regardless of the industry they work in, is to move from raw materials to finished saleable products in the least amount of time and with a great level of efficiency.
However, the border bottlenecks and truck misery could result in deteriorating warehouse operations, further undermining profit of manufacturers.
Ayorinde Akinloye, equity analysts at CSL Stock Brokers Limited said such decision underscores systemic failures as companies could see a reduction in revenue due to shortage of stock of finished products.
“Perhaps more worrisome is that a lot of companies import the large chunk of raw material to meet production,” said Akinloye.
Cadbury exports Tom Tom and butter milt candy across West Africa countries while it imports hot chocolate, a raw material component in the manufacture of Bournvita. PZ Cussons Nigeria manufacturers and marketers of popular products such as ROBB balm, Imperial Leather, and Morning Fresh imports crude palm oil because local production is not enough to meet consumption as weaker volumes and port issues continue to undermine margins.
The border bottleneck will also add to the misery of producers of the sweetener because they import raw material. United States Departments for Agriculture (USAID) forecasts Nigeria’s raw sugar imports in to hit 1.76 million metric tonnes by 2019./2020 marketing year, up over 1 percent from 1.74 million metric tonnes volume reported in marketing year 2018/19.
USAID attributes the uptick to increasing industrial demand, expanding population, and growing middle-class income.
“I just hope that these goods are non-perishable goods with expire date. The Federal Government needs to know the implication of what they are doing before making decisions. Companies may lose customers if they are unable to meet the demand,” said Ayodeji Ebo, managing director/ CEO of Afrinvest Securities Limited.
Abiola Gbemisola, an analyst at Chapel Hill thinks that Nestle, with a bigger (70:30) market share of the beverage industry, will cannibalize the sales of Cadbury if it is less susceptible to the risk.
“If Nestle doesn’t have the challenge, then it will mob up the sales of Cadbury. And that is a double whammy for the latter,” said Gbemisola.
Consumer goods firms are the worst hit from a slowly growing economy; gridlock at the Apapa ports, huge levies, double taxation, low consumer purchasing power, and smuggling are eating deep into profitability.
The combined revenue of 10 largest firms quoted on the floor of the bourse dipped by 2.63 percent to N752.014 billion in June 2019 from N772.14 billion the previous year.
Nigeria economy has been growing sluggishly as GDP expanded by 2.01 percent in the three months through March from a year earlier; that compares with 2.4 percent expansion in the fourth quarter. While inflation figure for the month of Ju;y fell to 11.08 percent, the figure is below the central bank’s target range of 6 percent and 9 percent.
Nigerians unemployment rate is 23.10 percent, one of the highest in the world.
Drilling down the figures shows Unilever Nigeria Plc’s revenue fell by 2.15 percent to N23.42 billion in June 2019 from N23.82 billion the previous year; It suffered 18.40 percent in the Homem and Personal business.
Dangote Sugar’s revenue fell by 4.15 percent to N80.36 billion in the period under review as smuggling and influx of cheap products continues to undermine earnings.
Dangote Flour Mills’ revenue’s sales reduced by 13.95 percent to N48.74 billion in the under review as against N56.35 billion the previous year.
Nacon Allied Industries’ suffered the steepest drop at the top lines as sales fell by 49.54 percent to N12.82 billion in the period under review from N25.76 billion the
previous year. However, some firms bucked the trend as they recorded growth in sales. Nestle Nigeria’s sales increased by 5.05 percent to N141.91 billion in June 2019. The growth in Revenue has been largely driven by solid growth in the Beverage business as the Milo RTD pack continues to gain widespread acceptance in the marketplace. Cadbury Nigeria revenue increased by 10.96 percent to N19.45 billion in the period under review from N17.55 billion the previous year.
BALA AUGIE
