The harsh operating environment experienced in the country which worsened with scarcity of foreign exchange, removal of fuel subsidy have impacted negatively on the performance of the manufacturing industry as companies listed under the sector recorded 351 per cent losses in the first half of 2023.
Investors in the nation’s Stock market said that shortages in forex supply coupled with inflationary pressure, currency redesigned of the Central Bank of Nigeria and other challenges witnessed from importing raw materials have affected the profit margin of manufacturing companies directly.
They said that all these joined together resulted in a decline in purchasing power and sales volume and revenue of the companies in the first six months of their operations.
This development according to them is currently impacting negatively on the share price of these listed firms under the manufacturing sector as most of the stocks are currently undervalued following negative sentiments that have enveloped demand for the stocks.
Specifically, a financial analyst, Mr Iheanyi Egbue said that the huge import levies, exchange rate volatility, haulage cost of imported materials and heavy dependence on alternative source of power has increased cost of production in the sector by almost 30 per cent.
Egbue said that the federal government failure to adopt a strategy that would encourage investment and development in the manufacturing sector mayerode shareholders 2023 full year dividend as the operating environment is currently very harsh and full of uncertainty.
Another investor, Mrs Florence Okeke said that with removal of fuel subsidy, introduction of floating of exchange rate, manufacturing firms have experienced an unexpected high operating cost with the attendant reduction in profitability as operating costs are expenses associated with the maintenance and administration of a business on a day to day basis.
She said with the high cost of living, the demand for goods and services have reduced drastically and as result most consumer goods companies in Nigeria have continued to find it difficult to weather the storm.
For instance, a look at the performance of Cadbury Nigeria Plc listed under manufacturing segment of NGX showed that it declared loss before tax of N14.52 billion in the first half of the financial year ended June 30, 2023 against profit before tax of N3.35 billion reported in the same period of 2022. The company reported a loss after tax of N14.54 billion compared to profit after tax of N2.34 billion in the corresponding period of 2022.
Also, Nestlé Nigeria Plc posted a loss after tax of N49.9 billion, a 280 per cent decline over N27.7 billion reported in the same period of 2022.
The company recorded revenue of N261.8 billion in the first half of 2023, representing a 17.7 per cent increase compared to its performance in the same period of 2022.
Nigerian Breweries Plc in the same vein reported N85.26 billion Net loss on foreign exchange transactions within the period under review from N7.28 billion in preceding year.
The company also declared a loss of N47.6 billion in the first half of 2023 representing 348 per cent compared to N18.74 billion achieved in H1 2022.
