Forex scarcity, others put pressure on FMCG companies’ profits

Industries, Trade and Investment

Analysts have identified scarcity of foreign exchange, inflationary pressures and rising input costs due to naira devaluation as responsible for the shrinking profit margins of some fast-moving consumer goods companies listed on the Nigerian Exchange Limited despite an overall increase in revenue.

An analysis of unaudited financial statements of consumer goods companies by our correspondent revealed that four of them saw either reduced profit margins or loss while two reported profit rise in the first half of this year.

Nestle Nigeria Plc, the largest FMCG company listed on the NGX by market capitalisation, saw its profit before tax in H1 2021 decrease by 1.43 per cent year-on-year to N33.38bn despite a revenue increase of 21.57 per cent.

International Breweries Plc recorded a 43.71 per cent in its loss before tax, which deepened to N17.22bn in H1 2021 from N11.98bn in the corresponding period of 2020, even as its revenues rose by 35.22 per cent from N60.61bn to N81.96bn.

Cadbury Nigeria Plc posted a loss before tax of N516.17m in H1 2021, compared with a profit before tax of N766.66m in H1 2020. Its revenue, however, increased by 16.37 per cent to N18.52bn from N15.92bn.

Dangote Sugar Refinery Plc recorded an increase of 13.91 per cent in its pretax profit, from N17.04bn in H1 2020 to N18.76bn in 2021. It recorded a 14.22 per cent profit margin in H1 2021, down from 16.51 per cent in the previous year.

NASCON Allied Industries Plc recorded a decrease of 6.37 per cent in its profit before tax.

However, Unilever Nigeria Plc and Nigerian Breweries Plc were able to grow their profit before tax by 168.88 per cent and 43.07 per cent respectively during the same period.

Unilever was able to recover from a N566.80m loss to a N1.03bn profit, while Nigerian Breweries increased its profit to N11.94bn from N8.35bn.

A research analyst at Atlas Portfolios Limited, Olaide Baanu, told our correspondent that the reduced profit margins were a result of an increase in transportation cost, high electricity tariff and decline of the naira against the United States dollar in the forex market.


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