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Nigerian listed consumer goods firms witnessed a tough first quarter as dampened consumers’ wallet in the light of fragile economic recovery, smuggling of cheap products, insecurity in the Northern part of the country, Apapa gridlock and among others weighed on their earnings performance, a trend analysts say will resurface in their mid-year performance.
Analysis of the first quarter financial results of eight consumer goods players revealed that five firms including Unilever, PZ and Dangote Sugar posted declines in their revenue.
According to Ayorinde Akinloye, analyst at CSL Stockbrokers, the insurgency in the northern region of Nigeria constrained firms’ distribution system, which consequently led to reduced sales revenue.
“For example, about 40 percent of Unilever ‘s revenues comes from the north, so if anything happens in the north they are going to be seriously affected and it showed in their Q1 revenue performance,” said Akinloye, adding the only positive thing for them was the stability in the foreign exchange market.
Revenue of Unilever dipped 21 percent to N19.2 billion in the first three months of 2019, from N24.3 billion in the previous comparable period. PZ Cussons’ top-line contracted by 13 percent from N63 billion to N55 billion in the first nine months ranging from June 2018 – February 2019. Note that PZ financials period is different from the rest of the companies
Among the brewers, while Nigerian Breweries and International Breweries saw revenue jumped 3 percent and 35 percent respectively, Guinness’ top-line shed 4 percent.
Food processers like Dangote Sugar and flour revenues declined by 7.3 percent and 13.6 percent respectively.
“Most of them highlighted the delay in terms of clearing goods and the cost. For some companies that is meant to keep their goods for 30 days in terms of inventory days but because of delay in the port it will take 90 days and that is going to be a major cost to them. And then we didn’t see enough election spending that would make consumers have money to spend on products,”Ayodeji Ebo, MD of Afrinvest Securities limited said on phone.
According to a H2 outlook report by Afrinvest Research, the consumer goods index declined the most, falling 16.9 percent in the first half of the year as the traffic gridlock in Apapa coupled with dumping of goods, took toll on the revenue and earnings performance of companies in the sector.
The report also added that the heightening inflationary pressure and currency weakness weighed on consumer purchasing power which resulted in weaker demands.
Akinloye said that he does not expect a fantastic year for consumer firms as the major problems that they facing is not something that can clear in six months.
But others are of the view that the firms would do well if the polices from the government is effectively and urgently implemented.
“If we see an increase in minimum wage which will increase money in circulation to boost demand, improvement in infrastructure, fixing of the Apapa port and the Central Bank of Nigeria (CBN) action to tackle smuggling, then we would see positive improvement in their performance,” Ebo said.