HI’18: Manufacturing firms’ incur more costs, up by 20.2%

HI’18: Manufacturing firms’ incur more costs, up by 20.2%

…CBN encourages companies to raise fund through CPs
… Analysts/stakeholders caution firms to be prudent in spending

Despite the steady decline in the inflation rate over the past 18 months, leading manufacturers quoted in the Nigerian Stock Exchange, NSE, which operate across sectors have recorded significant upsurge of 20.2 percent in their operating expenses, OPEX, in the first half of 2018, HI’18. The figure rose to N233.9 billion from N194.6 billion recorded in H1’17. Governor, Central Bank of Nigeria (CBN), Mr Godwin Emefiele The firms numbering 36, operated on short term borrowings amount to over N101 billion during the period, just about 1.8 percent up from N99.2 billion in 2017.

Given the political uncertainty which is likely to fuel an upsurge in inflation, market analysts and stakeholders in the Nigerian capital market have cautioned companies to be cautious and prudent in their expenditure as the country moves into the 2019 election, stressing that election will spike costs without a corresponding increase in turnover and margins, thereby reducing profitability at the end of the financial year 2018 and thus affect shareholders’ return on investment.

They further admonished that companies should weigh the cost of borrowing from banks and the capital market to be able to take prudent decision with regards to borrowing to run the companies.

Sectoral Review of Expenses

Meanwhile, Financial Vanguard ’s review of the HI’18 of the 36 companies’ performance show that manufacturing companies in the Industrial Goods sector recorded the highest expenses in absolute term with N116.9 billion in HI’18, up by 19.4 percent from N97.978 billion in H1’17.

A review of the sector’s performance shows that out of the 12 companies captured in the study, Dangote Cement recorded N86.863 billion, representing an increase of 19.3 percent from N 72.840 billion in HI’17. It was followed by Lafarge which expenses stood at N22.725 billion, indicating an increase of 24.9 percent from N18.194 billion in HI’17, while Vitafoam Nigeria recorded N 2.021 billion, representing an increase 1.1 percent from N1.999 billion in H1’17.

Consumer Goods sector came second on the sectoral chart, recording N87.7 billion, representing a growth of 23.6 percent from N70.9 billion in HI’17.

A review of the sector shows that out of the 10 companies captured in the study, Nigerian Breweries, recorded N24.323 billion, which represents 9.2 percent growth from N 22.269 billion in H1’17.

Nestle Nigeria came second recording N 23.425 billion, indicating 8.2 percent growth from N21.644 […]

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