How finance cost impact Nigerian consumer goods firms

Fast-moving consumer goods firms are grappling with rising finance costs as they ride on interest rate hikes.

The Central Bank’s interest rate hikes in combatting inflation have led to fast-moving consumer goods firms being hit by huge finance costs which grew 56 percent in 2024.

Champion Breweries recorded the highest finance cost growth of 529.4 percent, Guinness Nigeria recorded 197.5 percent, Nestle Nigeria at 68.22 percent growth, Dangote Sugar Refinery at 49.4 percent growth, and BUA Foods recorded 14.9 percent growth.

Uzo Uchenna, a professor of marketing at Lagos Business School said finance costs have been rising because of the way interest rates have increased with the effort to curb inflation.

“The movement in the interest rate and the devaluation impact are the two major elements that are affecting the cost of securing finance for the consumer goods firms,” Abiodun Keripe, managing director at Afrinvest Consulting Limited, said.

Analysts warn that the rising cost of debt is squeezing profit margins and may lead to higher product prices for consumers.

Just three consumer goods firms out of the eight firms analysed were able to record an after-tax profit while others recorded losses. These firms are Champion Breweries, Nascon Allied Industries and Unilever Nigeria.

Champion Breweries recorded an after-tax profit which surged to N816.9 million in 2024 from N370.6 million in 2023.

Nascon Allied Industries recorded an after-tax profit of N15.6 billion, and Unilever Nigeria recorded an after-tax profit of N4.89 billion from an after-tax profit of N6.87 billion.

The cumulative finance cost of eight consumer goods firms tracked by BusinessDay increased to N811.7 billion last year, highlighting the impact of the hawkish stance of the nation’s Central Bank.

Nigeria’s central bank jacked up benchmark interest rates from about 18 percent in July 2023 to 27.5 percent by the end of 2024 in an attempt to rein in stubbornly high inflation that averaged 32 percent in the year under review.

The interest rate increase made it difficult for the consumer goods firm to borrow as borrowing became more expensive as a result of the increasing cost of servicing debts.

Firm analysis

Champion Breweries

Champion Breweries recorded the highest finance cost growth of 529.4 percent in 2024. The firm’s finance cost amounted to N1.07 billion in 2024 from N0.17 billion in 2023.

Share price stood at N4.05 as of 11:41 am on March 18 with 276,282 volume and 8.95 billion shares outstanding.

After-tax profit surged to N816.9 million from N370.6 million. Champion Breweries’ revenue grew to N20.9 billion from N12.7 billion. Revenue is obtained primarily from the sale of its products (Champion beer and Champ Malta).

Guinness Nigeria

Guinness Nigeria recorded 197.5 percent finance cost growth in 2024. The firm’s finance cost amounted to N71.1 billion in 2024 from N23.9 billion in 2023.

Share price stood at N4.05 as of 11:41 am on March 18 with 276,282 volume and 8.95 billion shares outstanding.

Guinness Nigeria recorded an after-tax loss of N302.8 million from N5.23 billion. Revenue grew N259.6 billion from N142.6 billion. Revenue from export sales stood at N3.94 billion while domestic sales stood at N255.7 billion.

Nestle Nigeria

Nestle Nigeria recorded a 68.2 percent growth in finance costs in 2024. The firm’s finance cost amounted to N392.8 billion in 2024 from N233.5 billion in 2023.

Share price stood at N79 as of 11:55 am on March 18 with 152,342 volume and 2.19 billion shares outstanding.

Nestle Nigeria recorded an after-tax loss of N164.6 billion from an after-tax loss of N79.5 billion. Revenue grew N958.8 billion from N547.1 billion. Revenue from food stood at N616.5 billion while domestic sales stood at N342.3 billion.

Dangote Sugar Refinery

Dangote Sugar Refinery recorded a 49.4 percent growth in finance costs in 2024. The firm’s finance cost amounted to N301.3 billion in 2024 from N201.7 billion in 2023.

Share price stood at N36.7 as of 11:56 am on March 18 with 936,099 volume and 12.1 billion shares outstanding.

Dangote Sugar Refinery recorded an after-tax loss of N192.6 billion from an after-tax loss of N73.8 billion. Revenue grew N665.7 billion from N441.5 billion.

Revenue from the sale of 50kg of sugar stood at N643.7 billion, revenue from the sale of retail sugar stood at N17.5 billion, revenue from the sale of molasses stood at N4.16 billion and revenue from freight income stood at N338.5 million.

BUA Foods

BUA Foods recorded a 14.9 percent growth in finance costs in 2024. The firm’s finance cost amounted to N21.6 billion in 2024 from N18.8 billion in 2023.

Share price stood at N418 as of 11:58 am on March 18 with 32,769 volume and 18 billion shares outstanding.

BUA Foods recorded an after-tax loss of N73.9 billion from an after-tax loss of N69.5 billion. Revenue grew N73.9 billion from N69.5 billion. Revenue from sales of bagged cement amounted to N874.5 billion while sales of bulk cement amounted to N1.97 billion.

Few odds

The three exceptions from the eight fast-moving consumer goods analysed are Nascon Allied Industries which recorded a finance cost dip of 18.06 percent, Cadbury Nigeria recorded a 41.2 percent drop and Unilever Nigeria recorded a 97.8 percent decline.

Nascon Allied Industries

Nascon Allied Industries recorded a finance cost decline of 18.06 percent in 2024. The firm’s finance cost declined to N1.18 billion in 2024 from N1.44 billion in 2023.

Share price stood at N41.55 as of 11:58 am on March 18 with 2.09 million volume and 2.7 billion shares outstanding.

Nascon Allied Industries recorded an after-tax profit of N15.6 billion from an after-tax profit of N13.7 billion. Revenue grew N120.4 billion from N80.8 billion. Revenue from salt sales amounted to N112.9 billion while sales of seasoning amounted to N7.42 billion.

Cadbury Nigeria

Cadbury Nigeria recorded a 41.2 percent finance cost decline in 2024. The firm’s finance cost declined to N22.6 billion in 2024 from N38.4 billion in 2023.

Share price stood at N23 as of 12:02 pm on March 18 with 217,930 volume and 2.28 billion shares outstanding.

Cadbury Nigeria recorded an after-tax loss of N10.4 billion from an after-tax loss of N19.1 billion. Revenue grew N129.2 billion from N80.4 billion. Domestic sales amounted to N114.4 billion while export sales amounted to N14.8 billion.

Unilever Nigeria

Unilever Nigeria saw its finance cost decline by 97.8 percent in 2024. The firm’s finance cost declined to N0.09 billion in 2024 from N3.96 billion in 2023.

Share price stood at N37.7 as of 12:05 pm on March 18 with 215,207 volume and 5.75 billion shares outstanding.

Unilever Nigeria recorded an after-tax profit of N4.89 billion from an after-tax profit of N6.87 billion. Revenue grew N45.9 billion from N30.5 billion. Revenue from sales of food products amounted to N31.4 billion, revenue from personal care stood at N9.3 billion while revenue from beauty and wellbeing stood at N5.17 billion.