17 July 2017

Nigeria: Consumer Goods Firms Beat Recession, Revenue Up By N160 Billion

Lagos — Manufacturing companies listed in the Nigerian Stock Exchange's top 30 index gained over N160 billion in revenue in the 2016 full year financial statements despite foreign exchange devaluations and the difficult micro-economic environment that impacted sales.

Daily Trust analysis of 13 manufacturing concerns with the index, saw a total increase in revenue from N888 billion in 2015 to N1.05 trillion in 2016, representing a growth of 18 per cent.

The analysis also revealed that Profit After Tax grew by N84.6bn from N210bn in 2015 to N294bn in 2016, representing a growth of 40 per cent.

The findings is consistent with an earlier analysis by the newspaper which also revealed that banks quoted in the NSE posted a cumulative N504bn profit in 2016, an increase of N61.3bn (equivalent to 13.8 per cent) over the N443bn recorded in 2015.

The findings also revealed that 16 banks grew their cumulative gross earnings (revenue) from N3.6tr to N3.7tr - an increase in earnings of N88.3bn, representing a 2.4 per cent growth.

After more than a decade of strong GDP growth, Nigeria's economy fell into recession in 2016, with the World Bank estimating that GDP contracted by 1.7%. Falling oil prices reduced government revenues at national and state levels, resulting in delays to salary, payments to contractors and a reduction in infrastructure investment.

The associated devaluation of the naira and the limited liquidity of currency markets created additional pressures for consumers who experienced falling disposable income and inflation higher than 18% in the final months of the year, reaching 18.55% in December. In addition, a resurgence of militancy in the south of the country led to oil and gas shortages as pipelines were attacked, resulting in shortages of power and fuel.

This shows that overall, investors' returns outperformed inflation while beating recession. Companies in this batch, the analysis showed, included Cadbury Nigeria Plc, Dangote Cement Plc, Vitafoam Plc, Lafarge Africa Plc, 7up Bottling Company Plc, Flour Mills Nigeria Plc, Northern Nigeria Flour Mills, NNFM Plc, Honeywell Flour Plc, PZ Cussons Nigeria Plc and Unilever Nigeria Plc. Others were Nestle Nigeria Plc, Union Dicon, Portland Paint, Berger Paint, May and Berger and Okomu Oil.

Sectoral performance of the corporate growth, the analysis found, was led by banking sector where the breakdown revealed that five banks - GTB, Access, Zenith, Stanbic IBTC and UBA - recorded a total of N1.8 trillion revenue in 2016.

It was followed by the building materials sector, with Dangote Cement and Lafarge Wapco recording N834.8 billion revenue in the year under review.

Trailing behind the building materials sector is the beverages sector, where the Nigerian Breweries, Guinness and 7up Bottling Company recorded 501.3 billion revenue.

The Petroleum products sector occupied the fourth position, recording N400.6 billion, representing 9.1 per cent of the sectors' total revenue in the batch.

It was followed by food products sector which paraded three companies in the batch comprising of the Flour Mills Nigeria Plc, Northern Nigeria Flour Mills Plc and Honeywell recording a sector total of N394.4 billion for the year 2016 .

The food products manufacturing companies comprising of Cadbury Nigeria Plc and Nestle Nigeria Plc recorded N211.9 billion revenue.

Against these significant challenges, Nigeria's market for cement proved to be remarkably robust in the year with total market sales of Dangote Cement rising by 5.7% to 22.7Mt from 21.5Mt the previous year, 2015.

Market growth was very strong in the first four months of 2016 following the price reduction introduced for cement in September 2015. In fact, that enabled it to achieve 11 months of growth after that reduction, with the majority of cement being sold through retail outlets and distributors for small-scale building.

A team of analysts from Cordros Capital, a Lagos-based investment house, reporting on their visit to the market leaders, Nestle and Cadbury, had this to say: "Volume obviously has suffered under the weaker purchasing power but consumers have rarely changed in terms of consumption pattern.

"Price movement in 2016 was highly erratic. So far, only Cadbury gives notice ahead (a month) of price increase. Pricing remains a major concern in 2017, with the two companies having already increased prices this year.

"Nestle (as the market leader), in addition to always being the first to announce price increase, hiked prices the most in 2016. Nestle's Milo is about N200 more expensive than Cadbury's Bournvita equivalent. Yet, demand for Milo double Bournvita.

"Distributors believe the producers are the winners in terms of pricing. The distributors, wholesalers and retailers often have to absorb additional prices from the top. Distributors rarely face supply challenges. Products delivery is timely, and in most cases using trucks paid for by the producers.

"As stated earlier, conviction for Nestle's products remains very high. Milo, Maggi, and Golden Morn are the high conviction products."

Top five companies on dividend payment

Dangote dwarfed others in dividend. Analysis of the dividend payment shows that Dangote Cement recorded the highest dividend, doling out N136.168 billion, representing 1134 kobo per share in 2016 as against N102.243 billion, representing 1086 kobo per share in 2015.

Lafarge Africa Plc: The 2016 result also showed the company comfortably outperforming analysts' estimates on key earnings metrics.

FY:2016 revenue fell 17.8% year-on-year (YoY) to N219.7 billion, slightly ahead of analysts' estimate of N216.5 billion, while the Pre-tax loss of N22.8 billion also beat forecasts of N44.3 billion.

May and Baker Nigeria plc recorded gross profit of NGN2.5bn in the year under review compared to NGN2.4bn recorded in the previous year. Its operating profit for the year was NGN820.8 million compared to NGN655.8 million recorded in the 2015.

The company recorded NGN345.9 million as its profit before tax in 2016 in contrast to NGN142.3 million recorded in 2015. After deducting its tax for the period, May and Baker recorded NGN41.0 million loss for the year compared to NGN68.0 million recorded in the year 2015.

It acquired NGN8.6 million assets in 2016 compared to NGN8.2bn acquired in 2015. Its total liabilities for the period was NGN5.6bn compared to NGN5.1bn recorded in the previous year.


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