Chinwendu Obienyi

Despite the much taunted expansion in the economy which boosted macro-economic indices over the last three quarters, the fortunes of the Consumer Goods sector sank deeply as it underperformed in the first quarter (Q1) of 2018.

This sector comprising companies engaged in the production and manufacturing of final goods, and products and services classified for personal use, specifically intended for the mass market according to statistics obtained from the Nigerian Stock Exchange (NSE)’s website showed that growth in revenue was weak with a 6.59 per cent decline amounting to N264.03 billion as against N282.67 billion recorded in Q1 2017.

Daily Sun analysis revealed that revenue for the companies numbering 89 stood at N2.57 trillion, a 9.4 increase over N2.35 trillion recorded by the securities in the corresponding period of 2017. Profit before tax (PBT) turned in weaker at 2.5 per cent increase to N801 billion in Q1 2018 from N787.3 billion in 2017 thereby sauntering behind the inflation figure which stood at 13.4 per cent as at March 2018.

In terms of profitability, the banking sector led with N585.42 billion out of N800.93 billion PBT posted by the 89 companies, thereby accounting for 73 per cent of the total PBT. This was followed by the industrial goods sector, which posted N107.70 billion profit before tax, representing 13.4 per cent of the total PBT for the period. The Consumer Goods Sector placed third with N45.75 billion, representing six per cent of the total pre-tax profit. The oil and gas sector was the next after recording N36.21 billion PBT. This accounted for five per cent of the total profit, while the insurance sector posted N7.90 billion profit, representing less than one per cent of the total pre-tax profit for the period.

Further analysis of data obtained reveal that 5 out of the 10 companies analysed recorded profit declines. For instance Nigerian Breweries Plc led in terms of revenue with N82.97 billion revenue, representing a 9.1 per cent decrease from N91.29 billion recorded in the corresponding period in Q1’17. Dangote Sugar Refinery Plc followed, achieving N41.14 billion revenue from N59.53 billion in 2017 thus representing 31 per cent decline while Dangote Flour Mills Plc came third with N26.3 billion revenue, representing 9 per cent decline from N29.05 billion in Q1’17.

On the flipside, Nestle Nigeria Plc achieved N67.46 billion revenue, which represents 10 per cent increase compared to N61.15 billion posted in Q1’17. It was followed by Unilever Nigeria Plc as the company posted N25.82 billion turnover from N22.17 billion, representing 16.4 percent increase.

Analysts have attributed the decline recorded in the consumer goods sector to dwindling purchasing power of products and the insurgent attacks by herdsmen in the Northern part of the country.
They however warned that should the factors continue, the sector won’t be able to see profitability especially as the country prepares for next year’s general elections.

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Speaking to Daily Sun, Chief Executive Officer (CEO), Cowry Asset Management Limited, Johnson Chukwu said the main factor behind the decline in the consumer goods sector was down to the shift in necessity goods other than luxurious goods.

“Overtime, consumer purchasing power has been eroded because of inflation and now people are now concentrating on consumption of necessities instead of luxurious or lifestyle consumptions like breweries products and the rest. “

“It is also coupled with the fact that there has not been any adjustment in workers emoluments and so workers particularly on fixed income have had to adjust their consumption pattern with more emphasis on necessities. Similarly for the self employed people because of the situation of the economy, a lot of them have been adjusting their budget to basic necessities and that is why I believe the consumer goods index declined in the first quarter of this year.” He explained.
He thereafter added, “I think there will be some form of recovery not necessarily in the second quarter because there has not been any major economic adjustment as the budget has not been passed, no major source of ejection of liquidity into the economy so far in the second quarter. I believe when the budget is passed and as political activities kick off, money circulation will improve and income will improve, so there should be some positive improvement in consumer turnover in the third and last quarter of this year.”

CEO, Highcap Securities, David Adnori, attributed the decline to insecurity in several parts of the country, adding that it has gone a long way in reducing the consumption of products manufactured by the companies.

“The decline recorded in the consumer goods sector is due to the insecurity in several parts of the country and thus reduced the turnover and affected their bottom line. You know a lot of people are running away from states that are currently undergoing war and conflict and then the rural economy is also devastated by the Fulani Herdsman who have chased people away from their homes and farms in villages especially in the Northern part of the country. So this has reduced the consumption of products manufactured by these companies.”

He however disagreed with Chukwu’s positive outlook, saying unless the crisis stops, there may not be improvement in the profitability of these companies.

“There may not be an improvement if the crisis in the Northern part of the country continues coupled with socio-political risk as the country moves towards the 2019 general elections , this might adversely affect the income of those companies.”, Adnori agrued.

On his part, CEO, Perfecta Securities, Emmanuel Ezeh said, “This decline recorded is down to the low purchasing power of the consumers of the products. Goods are not free but are paid for and so the decline in that sector is down to most people privatizing now and going for needs and not wants anymore. “