Consumer goods struggle to shake-off tough times as stocks fall to 2yr low

Weak purchasing power, infrastructural challenges continue to take a toll on Nigerian consumer goods firms, leaving investors unimpressed with companies’ figures, and dragging share performance of listed players in the space.

The Nigerian Stock Exchange Consumer Goods Index on Wednesday dipped to its lowest level in two years as market pessimism weighed on performance of food, beverage and tobacco manufacturers’ shares.

The Consumer Goods Index is an investable benchmark capturing the performance of the listed consumer goods companies. The measure plunged 1.22 percent Mid-week to its bottommost since March 6, 2017 where index points rose to 618.90 as bearish sentiments prevailed in the day’s trading.

“Most Consumer Goods firms are struggling and churning out unimpressive numbers,” Gbolahan Ologunro, equity analyst at Lagos-based CSL Stockbrokers said.

Consumer goods firms have noted difficulties in their operation arising from smuggling, traffic gridlock, dilapidated road infrastructures, and high cost of borrowing while slower economic growth than population increase has limited the spending power of households.

In the first quarter of 2019, food, beverage and tobacco growth slowed to 1.76 percent, the second weakest growth since Q1 2018 where the sub-sector grew at 5.46 percent, according to the National Bureau of Statistics (NBS).

“It is not unexpected that you would see investors react negatively by selling down their holdings,’’ Ologunro added.

The All Share Index fell for the third straight session on Wednesday where performance across the board fell by 0.15 percent with year to date at -5.27 percent. Lagos bourse has closed in the green just once in the last thirteen trading sessions.

Of the 15 companies that make up the consumer goods index, only two have a positive year to date return, with the 13 others with an average erosion of value up to 25 percent so far in the year.

Cadbury has gained 9.5 percent year long as it closed flat at N10.95 per share on Wednesday. However it is Dangote Flour that has appreciated the most among peers, surging 146.72 percent so far in the year after it gained 1.2 percent to N16.70 percent same day.

Leading the laggards, Interbrew has shed 42.25 percent to N16.7 per share, while PZ trades 42.15 percent lower at N7 per share, although it opened for the year at N12.1 per share.

Across sectors, Consumer Goods has been the most affected by the dampened sentiment of investors so far in 2019. The sector has lost 19 percent after it dipped 0.41 percent to 605.33 points on Wednesday.

Insurance index is down by -7 percent on year to date and lost 0.3 percent on Wednesday. Oil and Gas also closed in the red after printing -0.65 percent mid-week and has a negative year’s return of 17 percent.

Industrial Goods firms have lost 16 percent so far in 2019 and closer 0.83 percent lower on Wednesday while Banking Sector gained 1.34 percent same day and has lost 9 percent in 2019.

SEGUN ADAMS