Sector operators said the current forex situation has compounded the pressures emanating from the removal of oil subsidy, Russia/ Ukraine war among other adverse developments.

The operators said the sector now bleeds from multiple points as a result of exchange rate revaluation losses.

Consequently, information contained in the financial reports of the top 17 manufacturing companies listed on the Nigerian Exchange Limited, NGX , indicated that while their gross earnings rose as they increase the prices of their products, their profits crashed as a result of the multiple pressure points eroding their financial stability.

Data sourced by NewMailNG from the financials of the big manufacturing firms on the Exchange showed a net foreign exchange loss of N466.02 billion in the nine months ended September 2023 (9M’23) representing an overwhelming increase of almost 400% from N93.219 billion loss recorded in 9M’22.

The data showed that while the combined gross earnings of the firms grew by 23.4% to N4.4 trillion in 9M’23 as against N3.6 trillion in 9M’22, the companies recorded a 24.6 percent decline in combined Profit Before Tax, PBT, to N505.148 billion in 9M’23 as against N670.089 billion in 9M’22.

Cost of consumer goods

The trend is reflected in the increased cost of producing consumer goods, which are mostly essential commodities used regularly by households.

These include foods and beverages, toiletries, over-the-counter medicines, cleaning and laundry products, plastic goods, and personal care products, among others.

Findings reveal that while the companies increased the prices of their products in response to the inflationary pressures on their operating cost, this has resulted in low volume of patronage from the consumers whose income has equally been eroded by inflation.

The situation has now combined with losses they recorded in foreign exchange revaluation just as the higher exchange rate also increased the cost of foreign input forcing them to either close some production lines or scale down output below break-even points.

Data from the National Bureau of Statistics (NBS) showed that the inflation rate in Nigeria closed 9M’23 at 26.72%. The figure has since risen to 27.3 %percent as at the month of October 2023 and is projected to rise further this month, possibly sustained to year end.

Also, the Naira value against the US Dollar which stood at N448.04/US$ at the beginning of the year (2023) crashed to N832.32/US$ as at end 9M’23 following the Central Bank of Nigeria (CBN) foreign exchange reforms in mid-June.

Foreign investors in manufacturing pulling out

The protracted foreign exchange scarcity which affected Cadbury Nigeria on raw material imports, has forced its management to pass on costs to consumers by hiking prices.

The same goes for GlaxoSmithKline, GSK, Nigeria. But this has already proved unsustainable, forcing the company to announce plans by its parent company, GSK UK Group, to end manufacturing operations in Nigeria. The Company said further that it would explore a third-party direct distribution model for its pharmaceutical products.

Unilever Nigeria is another multinational consumer goods company discontinuing the manufacturing of its homecare and skin-cleansing brands.

Just last week, Procter & Gamble, P&G, an American multinational involved in manufacturing of fast moving consumer goods (FMCGs), announced its plan to discontinue their manufacturing operations in Nigeria due to the harsh operating environment.

Blue chips bleeding

The blue chip manufacturing companies, most of which are multinationals suffered more from forex revaluation losses.

Leading the pack in this adversity is Nestle Nigeria which lost N127.5billion to forex revaluation loss, thereby eroding its profitability. Consequently, the company recorded loss before tax of N56.7 billion as against profit of N58.4 billion in 9M’22. This is despite the company’s 18.9% increase in gross earnings to N396.6 billion from N333.5 billion in 9M’22.

Dangote Cement recorded a huge forex revaluation loss of N99billion which seems to have dampened what would have been a supper profit in the 9M’23. It however made a surprising 20.5%  rise in profit to N404.9billion as against N335.900 billion in 9M’22, at the backdrop of a rise in gross earnings to N1.5 trillion in 9M’23 from N1.2 trillion in 9M’22,

A forex revaluation loss amounting to N86.8 billion eroded Nigerian Breweries’ profitability as giant beverage multinational declared a total loss amounting N78.2 billion during the period despite a modest 2.1% growth  in gross earnings to N401.7 billion from N393.3 billion.

Another brewer, International Breweries was hit with N39.9 billion forex revaluation loss which escalated the company’s operating losses before tax to N43.5 billion as against N2.8 billion it recorded last year. This is despite the 14.6% increase in gross earnings to N183.8 billion from N160.4 billion in 9M’22.

BUA Foods reported a forex revaluation loss of N33.3billion which moderated what would have become a super profit growth at 50% to N111.4bilion from N74.3billion in 9M’22, at the backdrop of 81.0% increase in gross earnings to N524.4billion as against N289.8billion in 9M’22.

Similarly, its sister company, BUA Cement posting N24.8 billion in forex revaluation loss which dampened its profitability with a 3.4% decline N85.7 billion from N88.8 billion despite the rise in gross earnings to N335.9billion as against N262.6billion in 9M’22.

Other significant forex revaluation losses were recorded by Cadbury Nigeria which reported N20.7billion revaluation loss which eroded its profit forcing the firm to declare a loss of N10.2 billion as against a profit of N4.0 billion it recorded in 9M’22. This is despite the 39.2% increase in gross earnings to N59.2 billion from N42.5 billion in 9M’22.

GloxoSmithKline seems to be showing heavy bleeding on all fronts. It posted a forex revaluation loss amounting N11.3 billion and its PBT declined 0.8% to N0.722 billion from N0.716 billion just as gross earnings went down massively to N10.9 billion from N20.4billion,

Similarly Lafarge Cement reported forex revaluation loss amounting to N9.4 billion. But the firm also reported increase in gross earnings at N289.1 billion as against N269.9 billion in  9M’22 , with PBT growing by 13.4% to N61.2 billion from N53.9 billion.

Unilever Nigeria recorded forex revaluation loss of N2.9billion as the company’s profitability was making a rebound by 937.4% to N4.9billion from N0.5 billion on the backdrop of a rise in gross earnings to N81.6billion from N64.8billion in 9M’22,

Vitafoam recorded a forex revaluation loss of N3.8billion which contributed to the 14.4% profit decline to N6.2billion from N7.2billion in 9M’2 despite a rise in gross earnings to N52.8billion from N46.3billion in 9M’22,

Okumu Oil also recorded forex revaluation loss amounting to N2.9billion. But its PBT grew by18.7% to N29.2billion from N24.6billion in 9M’22 at the backdrop of a rise in gross earnings.

Guinness Nigeria reported that its profit went down 5.6% to N3.8billion from N4.04 billion at the backdrop of N1.9billion forex revaluation loss, despite growth in gross earnings at N59.5 billion as against N52.849 billion in 9M’22.

Notore  Chemical recorded a forex revaluation loss of N1.8billion which added to its massive rise in losses amounting N66.2billion as against N0.95billion loss in 9M’22. The bad result also came with a massive decline in gross earnings to N12.7billion as against N32.9billion in 9M’22, and recorded

Nascon Allied reported a slim forex revaluation loss of N.6million and its profit grew massively by 282.0% to N16.3billion from N4.3billion in 9M’22 at the backdrop 45.6% increase in gross earnings to N59.1billion as against N40.6billion in 9M’22.

One of the surprising results is Dangote Sugar which did not record any forex loss, and its gross earnings increased by 7.4% to N309.713 billion from N288.320 billion in 9M’22, but it ended up posting a loss before tax of N41.3billion as against a profit of N36.3billion in 9M’22.

Analysts /Experts react

Reacting to this development, Tajudeen Olayinka, who is the  CEO, Wyoming Capital and Partners said: “A  long the local foreign exchange market continue to react to the vagaries of demand and supply side imbalances, so long economic agents with net dollar liabilities will continue to be impacted negatively by depreciation and foreign exchange losses.

“This was responsible for the huge losses suffered by those manufacturing companies you mentioned. And it will remain so until the affected companies are able to put measures in place to recover losses through necessary hedging and repricing of earning assets.”

On the implication of these losses, he said: “ The implication of these losses to the companies and economy in general is a continued elevation in inflation and further deceleration in output growth.”

Also reacting, David Adonri,  the Executive Vice Chairman, HIGHCAP Securities Limited said: “The nine months increase in forex losses by manufacturing companies in 2023 is due to the huge depreciation of the Naira following deregulation of the foreign exchange market in June 2023.

“The loss was transmitted to the manufacturing account of manufacturers through their outstanding forex liability to foreign suppliers of manufacturing inputs. Notwithstanding the improvement in their revenue, the FX losses overwhelmed their Profit.

“The losses were so colossal that some of the manufacturers have lost their shareholders fund. Many others have wound down their businesses and are at the verge of exiting the country. The losses have become a threat to the existence of many of the manufacturers.”

On the implication of the losses, he said: “Government should not expect to receive income tax from the wounded companies this year. Loss of capital will definitely take a toll on the capacity utilization of the manufacturers affected, resulting in layoffs and scarcity of their products.”

Solution

On the way forward, he said: “Government needs to engage with the manufacturers to address this threat to their existence. However, the losses will be recovered in due course as the economy adjusts to the new market reforms and price level.”

Reacting, Victor Chiazor, The Head of Research of Research and Investment said: “Most of the manufacturing companies suffered severe Forex losses because most of them import their raw materials for production from outside the country.

“And given the floating of the Naira which happened in the second quarter most were forced to provide more Naira to accommodate their production inputs. This exchange rate difference was significant enough to weaken their profit levels and even throw some of the manufacturers into loss after tax for the 9 months period.”

Going forward, he said: “We may see a direct transfer in the cost differential as most manufacturers will have no option than to pass this cost to the final consumer which will eventually lead to lower sales volume and most likely lower profitability for the company.

“This would also slow down activity level in the economy as a continuous rise in the price of goods and services will weaken the purchasing power of the consumer and overall weaken consumption.

“The government will need to find a way to stabilise the FX market to enable businesses plan as well as find incentives for some critical manufacturing businesses all of which would assist in keeping these businesses afloat.”

The post Manufacturing sector bleeds as forex loss rises 400% to N466bn appeared first on New Mail Nigeria.

The index lost 178.31 points or 0.64 per cent to close lower at 27,864.49 against 28,042.80 achieved on Wednesday.

Also, the market capitalisation, which opened at N13.666 trillion shed N87 billion or 0.64 per cent to close at N13.579 trillion.

The downturn was impacted by losses recorded in medium and large capitalised stocks, amongst which are: Seplat, International Breweries, MTN Nigeria, Nigerian Breweries and Ecobank Transnational Incorporated (ETI).

Capital market analysts said that bearish sentiment on the nation’s bourse deepened further on Thursday, as the market performance indicator (NSE-ASI) fell to 27,000 index points, the lowest in the last 26 months.

Analysts at Afrinvest Limited noted that “we expect the market to trade bearish in the sessions ahead.”

Analysts at Cordros Capital Limited maintained that “our outlook for equities in the short to medium term remains conservative, amidst the absence of any catalyst to drive positive market returns.”

NAN reports that market breadth was negative, with 12 gainers compared with 19 losers.

Conoil recorded the highest price gain in percentage terms, appreciating by 9.76 per cent to close at N20.25 per share.

Dangote Sugar Refinery followed with a gain of 9.22 per cent to close at N11.25, while Sovereign Trust Insurance appreciated by five per cent to close at 21k per share.

Japaul Oil & Maritime Services went up by 4.76 per cent to close at 22k, while FCMB Group appreciated by 4.58 per cent to close at N1.60 per share.

Conversely, Berger Paints and International Breweries led the losers’ chart by 10 per cent, each to close at N6.30 and N17, respectively.

Seplat followed with a lose of 9.43 per cent to close at N5.30 per share.

C &I Leasing and NEM Insurance depreciated by 9.17 per cent each to close at N4.95 and N2.08, while ETI declined by 9.05 per cent to close at N9.05 per share.

The volume of shares traded closed lower with an exchange of 175.36 million shares valued at N2.71 billion in 2,653 deals.

This was in contrast with 243.72 million shares worth N3.89 billion exchanged in 3,449 deals on Wednesday.

Transactions in the shares of FBN Holdings topped the activity chart with 33.33 million shares valued at N189.9 million.

Zenith Bank followed with a turnover of 21.27 million shares worth N395.12 million, while Sterling Bank traded 16.75 million shares valued at N35.56 million.

United Bank for Africa (UBA) sold 16.28 million shares worth N90.37 million, while Access Bank sold 9.35 million shares worth N56.81 million.

The post NSE drops to 27,000 mark, amid Seplat losses appeared first on New Mail Nigeria.

In a statement made available to the press on Friday, Obienyem said his boss meant to say South African Breweries (SABmiller), which used to be the second largest brewery in the world.

“Obi actually brought them – SABmiller – to Nigeria and personally attracted them to build the facility in Onitsha, after many years of the company trading with the family business he used to manage,” Obienyem said.

He revealed that beyond SABmiller, Obi also brought many other companies to build their facilities in Nigeria in conscious efforts to contribute to the expansion of the country’s industrial base.

Obienyem further explained that the mention of International Breweries was because of the consolidation of business interests of the two companies in Nigeria into International Breweries Plc.

Obienyem concluded that with Atiku and Obi’s experiences and wide contacts in the business world, that Nigeria’s industrial base will certainly grow exponentially under their Presidency.

The post Obi brought SABmiller to Nigeria and not International Brewery – Aide appeared first on New Mail Nigeria.

International Breweries led the gainers’ table with a gain of N4.20 to close at N45.20 per share.

Dangote Cement came second with a growth of N2 to close at N231 and NASCON inched 46k to close at N15.98 per share.

Cadbury appreciated by 40k to close at N10.75, while FBN Holdings added 12k to close at N7.19 per share.

Consequently, the All-Share Index grew by 125.4 points or 0.34 per cent to close at 37,138.97 against 37,013.57 achieved on Tuesday.

In the same vein, the market capitalisation which opened at N12.810 trillion inched N43 billion or 0.34 per cent to close at N12.853 trillion.

Ambrose Omordion, the Chief Operating Officer, InvestData Ltd., said that the market growth was as a result of last minutes value gain posted by Dangote Cement.

Omordion said that investing confidence in the market was due to improved fundamentals of some companies’ earnings and not the proposed 2018 budget.

On the other hand, 7UP recorded the highest loss to lead the losers’ table, dropping by 60k to close at N84.40 per share.

Flour Mills trailed with a loss of 50k to close at N34 and Zenith Bank shed 22k to close at N25.58 per share.

Nigerian Breweries was down by 21k to close at N143.89 and Redstar Express depreciated by 18k to close at N4.80 per share.

However, the volume of shares traded dipped by 36.59 per cent with an exchange of 193.48 million shares valued at N1.81 billion transacted in 3,904 deals.

NAN reports that this was in contrast with a total of 305.17 million shares worth N2.91 billion traded in 4,274 deals on Tuesday.

Diamond Bank from the banking industry was the most active in volume terms, exchanging 36.28 million shares valued at N43.61 million.

FBN Holdings followed with an account of 35.18 million shares worth N248.77 million, while Fidelity Bank traded 19.45 million shares valued at N32.95 million.

FCMB Group exchanged 17.45 million shares worth N20.89 million and AIICO Insurance sold a total of 9.47 million shares valued at N5.10 million.

The post International Breweries, Dangote Cement lift NSE Index by 0.34% appeared first on New Mail Nigeria.

The market capitalisation, which opened at N10.272 trillion on Thursday, lost N164 billion or 1.59 percent to close at N10.108 trillion.

Also, the All-Share Index lost 29,393.77 points representing 1.59 percent to close lower at 29,393 compared with 29,870.86 attained on Wednesday following huge loss.

Analysts attributed the persistent bearish trend at the exchange to exit of foreign investors due to drop in oil price at the international market.

Analysis of the price movement chart indicated that 23 equities recorded price depreciation.

Nestle recorded the highest price loss dipping by N9.79 to close at N830 per share.

It was trailed by Dangote Cement with a loss of N8.70 to close at N165.30 while Seplat dropped N7.25 to close at N225.21 per share.

Lafarge Wapco lost N4 to close at N97, while PZ Cussons depreciated by N1.33 to close at 25.28 per share.

Stanbic IBTC topped the gainers’ chart, with a gain of N1.20 to close at N23.20 per share.

International Breweries garnered 85k to close at N17.86, while GTBank grew by 22k to close at N23.90 per share.

UBA increased by 16k to close at N3.46, while Ikeja Hotel gained 15k to close at N3.27 per share.

In all, investors staked N2.89 billion on 273.68 million shares transacted in 3,733 deals.

This was against the 439.66 million shares worth N4.53 billion transacted in 4,345 deals on Wednesday.

The Financial Service Sector sustained its leading position as the toast of investors with 178.35 million shares worth N757.95 million in 1,438 deals.

The Banking sub-sector drove activities in the sector accounting for 110.33 million shares valued at N640.52 billion achieved in 1,117 deals.

c

Follow Us

The post NSE market capitalisation drops by N164bn appeared first on New Mail Nigeria.