Manufacturers lose 50% half-year profit to operating, forex costs |

• Epileptic power supply, exchange rate raise cost of production by 30%
• Stakeholders urge FG to reschedule existing loans, grant tax holiday to firms
• Local sourcing of raw materials solution to forex scarcity, says MAN

The harsh operating environment aggravated by COVID-19 disruptions and foreign exchange liquidity crisis has caused the fortunes of local manufacturing firms to plunge by 50 per cent in the first half (H1) of 2021.
 
The manufacturers, all listed on the Nigerian Exchange Limited (NGX), were severely impacted by low capacity utilisation, on the account of huge import levies, exchange rate volatility, haulage costs of imported raw materials and heavy dependence on alternative source of power that has increased production cost by 30 per cent.
 
Worried by the widening chaos in the sector’s key performance indicator, operators have urged the Federal Government to reschedule existing loan repayment obligations and grant tax holiday to companies to avoid erosion of equity investors’ dividend payout in 2021 full year result.
 

With the prevailing forex scarcity and inflationary pressures on households and logistics, as well as regulatory bottlenecks on imported raw materials, the margins of these firms were affected directly, resulting in a fall in demand, sales volume, revenue and underlying profits of the players, especially in the half year operations.
 
The worst hit was the share price of these companies on the Exchange. Price movement of some stocks under the sector had remained stagnant in the past few years, following negative sentiments that have enveloped demand for the stocks.
 
A look at the performance of companies under the sector showed that Nestle, the biggest in the consumer goods sector by market capitalisation, grew its revenue by 22 per cent to N171.44 billion from N141.32 billion achieved in the corresponding period in 2020.
 
However, the company’s finance cost soared by 262.15 per cent to N3.39 billion in H1, 2021 from N937.36 million recorded during the same period in 2020. Its marketing and distribution expenses increased by over N3 billion to N23.49 billion in H1, 2021 while administrative expenses remained relatively unchanged at N6.61 billion.
 
Due to rise in marketing and distribution expenses, coupled with a surge in finance cost, the company’s profit before income tax dropped to N33.38 billion from N33.86 billion in H1, 2020.
 
The firm also paid income tax of N11.65 billion in H1, 2021, thus the profit after tax settled at N21.73 billion, slightly down from N21.83 billion reported in H1, 2020.
 
For Cadbury Nig. Plc, its revenue for the period showed 16 per cent increase in revenue from N15.9 billion recorded in the previous quarter to N18.5 billion. However, the company’s loss before tax stood at N516 million, while net assets declined by 2.8 per cent from N13.6 billion to N13.2 billion.
 
Also, Meyer Plc, a renowned manufacturer and marketer of high…