The Consumer Goods sub-(CGS) sector’s operations have continued to be hampered by rising inflation, a lack of foreign currency, and an all-around challenging operating environment. At the same time, the listed companies in the sector have experienced a recent decline in earnings and a bleak outlook.
The sector, which tracks the performance of consumer companies listed on the Nigerian Exchange Limited (NGX) floor, declined by 8.12% in July, falling from 623.99 index points to 573.27 points.
The All-Share Index, which tracks the performance of publicly traded firms, ended July with a loss of 2.8% month-to-date (MTD), and the market capitalization fell by N773 billion as a result of the continuous sell pressure the stocks market experienced during the month.
In fact, the CGS is currently burdened with high finance and operational costs, which are made worse every day by growing inflation, unemployment, and underemployment. This decrease in demand for fast-moving consumer goods has a knock-on effect for sales and earnings.
The sector is also dealing with increased production costs, which are mostly caused by a subpar or, in some cases, nonexistent electricity supply. A financial pressure is being placed on the sector by rising diesel prices and a meager level of power supplies.
Additionally, while most businesses operating in the nation battled increases in materials used for manufacturing, among other things, a spike in cost of sales and administrative overhead has also had a significant influence on their bottom line.
Nigerian Breweries Plc, International Breweries Plc, PZ Cussons Nigeria Plc, Cadbury Nigeria Plc, and Unilever Nigeria Plc made the list of top five poorly performing companies, according to data from the NGX, which focused on the worst performing consumer goods stocks for the month of July 2022.
For instance, during the month, the price of Nigerian Breweries’ stock fell. The price of the brewery company, which is the most capitalized brewery in Nigeria and is listed on the NGX, dropped 17.42% in July, from N58.80 kobo to N47.70 kobo.
Sell-pressure on the company caused its market capitalization to drop from its opening value of N474.858 billion at the start of trading on July 1, 2022, to N392.137 billion at the close of trading on July 31, 2022.
Nigerian Breweries Plc reported revenue for the first six months of the 2022 fiscal year, which ended on June 30, of N274.03 billion. Additionally, the business reported N19.08 billion in Profit After Tax (PAT) for the same period.
Further examination of the data showed that during the same similar period in 2022, the cost of sales rose by 18.3%, from N131.34 billion in H1, 2021, to N155.35 billion.
Additionally, expenses for marketing, distribution, and administration increased by 44.6%, from N58.42 billion in H1 2021 to N84.45 billion in H1 2022, due to an increase in commercial activity following COVID, an increase in diesel prices, and higher wages brought on by collective bargaining agreements.
International Breweries Plc saw a monthly price decline of 15.07%, from N6.30 to N5.35 per share, on the company’s shares. The market capitalization of the company decreased by N25.519 billion due to the decline in share price, closing at N143.712 billion at the end of trading in July as opposed to opening at N169.231 billion on July 1st.
With a profit before tax (PBT) of N1.9 billion for the first quarter ended March 31, 2022, up from a loss before tax of N3.6 billion in Q1 2021, International Breweries Plc (IBPLC) has returned to profitability from its loss position.
The market capitalization of PZ Cussons Nigeria Plc decreased by N4.367 billion or 11.45% during the period under review, closing at N33.749 billion at the end of July 2022 from the opening figure of N38.116 billion. This decline was due to a decrease in the company’s shares, which fell by 11.45% during the period under review, from N9.60 per share to N8.50 per share.
For the quarter that concluded on May 31, 2022, the company reported its Q4 2021/22 unaudited results, showing a profit of N758.37 million, an increase of 11.71 percent over the same period the previous year.
The market downturn also had an impact on Cadbury Nigeria Plc’s share price, which fell by 10.72% during the period under review, from N17.25 to N15.40 per share. This caused the market capitalization to decrease by N3.474 billion, or 10.72%, to close at N28.924 billion at the end of July 2022 from the opening figure of N32.398 billion.
The business has maintained its ongoing repositioning effort. According to the company’s most recent financial highlights report for the first half of 2022 (covering the months of January to June 2022), its turnover increased to N27.8 billion in H1 2022, up 50.5% from the N18.5 billion realized during the same time in 2021.
Its profit during the studied period increased from N516 million in H1 2021 to N2.34 billion in H1 2022, an increase of 553.7%.
The market decline has also hurt shares of Unilever Nigeria Plc, whose price fell 4.05 percent during the month from N14.80 to N14.20. The market capitalization decreased by N3.447 billion to N81.579 billion at the end of trading on July 31, 2022, from a starting value of N85.026 billion on July 1, 2022, as a result of the negative activity.
The manufacturing industry is burdened with high financing and operating costs, according to the chief operating officer of InvestData Consulting Limited. He also noted that manufacturers continue to face a number of difficulties that are largely to blame for the industry’s lackluster performance and the competitiveness of Nigerian-made goods.
The manufacturing sector in Nigeria, he noted, was plagued by a number of problems, including a high inventory of unsold finished goods, insufficient electricity supply, frequent increases in electricity tariffs in response to subpar services from distribution companies, and unusually high interest rates.
Inadequate trade facilitation infrastructure, high diesel prices, hostile port environments, a plethora of taxes, levies, and fees, exorbitant haulage costs, congestion at the Lagos seaports caused by the inefficiency of other seaports in the nation, a high incidence of smuggling, and widespread counterfeiting of locally produced goods are just a few additional constraints.
Amechi Egbo, a private investor, stated: “Consumer behavior has a significant impact on consumer goods industry performance. Higher-end goods will be in more demand as the economy expands, but if purchasing power is low, individuals will switch from more expensive goods to less expensive ones in order to still satisfy their craving for that particular good.
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