No respite for investors as rising costs shrink FMCG firms' earnings

The effect of naira devaluation, rising ostentation and involvement complaint hikes has continued to instrumentality a immense toll connected the show of firms nether the fast-moving user goods (FMCG), causing their fiscal outgo to soar.

Aside from the naira devaluation past year, determination has been a crisp summation successful the monetary argumentation complaint (MPR) since the opening of the twelvemonth 2023. This has continued to erode the purchasing powerfulness of Nigerians, putting much unit connected the margins of FMCG companies and negatively impacting their bottommost line.

Honey Flour Mills, different starring flour miller, reported a 28 per cent YoY maturation successful its gross to N188 cardinal from N147 cardinal successful the erstwhile year.

However, owed to rising costs and soaring involvement rates, which person affected the outgo of funds, the institution incurred N36 cardinal successful the nett outgo of concern for the operating year, representing a leap of 160 per cent YoY from N14 cardinal successful 2023 and translating into a nett nonaccomplishment aft taxation of N10.1 cardinal from a nett of N256 million.

Operators said the rising involvement complaint and devaluation are the 2 large elements that are affecting FMCG companies arsenic immoderate of the companies had overseas currency-denominated loans successful their books. The loans accrued successful naira worth connected the backmost of the depreciation of naira. This has resulted successful the nonaccomplishment of presumption for galore firms successful the sector, making it hard for astir of them to wage a dividend.

Aside from the FMCG, six multinationals operating successful Nigeria incurred combined losses of up to N540 cardinal past twelvemonth adjacent arsenic they besides person wide holes successful their operations to plug which whitethorn not alteration them to wage dividends until they afloat retrieve from these losses.

From May 2022 to October 2023, MPR was raised by 725 ground points to 18.75 percent. This year, the involvement complaint was raised by 200 ground points from 22.75 per cent successful February to 24.75 per cent successful March 2024.

Last month, the Monetary Policy Committee of the Central Bank of Nigeria besides accrued the benchmark involvement complaint by 150 ground points from 24.75 per cent to 26.25 per cent.

President of New Dimension Shareholders Association of Nigerian, Patrick Ajudua, said the FMN recorded improved top-line show of N2.3 trillion contempt that the steadfast incurred N137.5 cardinal successful overseas speech losses arsenic against N31.5 cardinal suffered successful the erstwhile twelvemonth due to the fact that of naira devaluation which accrued its outgo of servicing overseas loans.

“Most companies successful the manufacturing assemblage suffered overmuch from the effect of naira devaluation, inflation, high-interest complaint and vigor cost. This has resulted successful a nonaccomplishment presumption and made it hard for astir of them to wage dividends,” helium said. Head Equity, Planet Capital, Paul Uzum said the past twelvemonth has been precise pugnacious for firms successful the user goods sector.

“Not lone Flourmills but firms similar Dangsugar, Honeywell, Nestle, NB, Guinness, Unilever, Cadbury and PZ. They were each deed by 2 factors, 1 is the monolithic devaluation of the naira which made astir of them grounds speech losses,” helium said.

According to him, the rising poverty, inflation, and unemployment are causing a autumn successful request for astir goods successful Nigeria arsenic consumers are presently focusing connected the acquisition of lone indispensable goods and good arsenic switching to cheaper alternatives wherever possible.

“For Flourmills, it is expected that this nonaccomplishment is simply a one-off event, and the institution volition revert to its winning ways of accordant profit-making by the adjacent fiscal year.”

Head of Research, FSL Securities, Victor Chiazor, said the user nutrient assemblage was importantly impacted by the FX policy, peculiarly those exposed to overseas loans oregon importing their earthy materials.