Operators list pangs of sector from high cost of raw materials
The manufacturing sector was not was not insulated from the harsh operating environment as the bottom-line of the listed equities, especially in the last financial year have remained susceptible to the challenges facing the agribusiness in Nigeria.
Indeed, the most hit was the share price of these companies on the Nigerian Stock Exchange, which has remained stagnated at nominal value year to date following negative sentiments that have enveloped the demand of the stocks.
For instance, with a nominal share price value of 50kobo FTN Cocoa Processors Plc, a pioneer status agro-allied company has continued to battle with lower sales and declining bottom-line as it posted a loss after tax of N577.204 million for the full year ended December 2014.
Specifically, the figure showed 181.79 per cent higher than N204.831 million loss after tax reported at the comparable period of 2013.
The company’s revenue in a filing with the Nigerian Stock Exchange also fall by 46.28 per cent from N460.633 million in 2013 to N247.418 million recorded during the period under review.
However, what seems to be a respite from the loss position came the way of the company it began the year 2015 in a positive route with 155.4 per cent growth in revenue for the first quarter ended March 31, 2015.
The company’s revenue grew to N387.972 million during the first quarter from N151.894 million recorded during the comparable period of 2014, accounting for 155.4 per cent increase.
The company also returned from loss position during the period to a profit of N3.695 million.
Expectations, that the good numbers posted during the first quarter will be sustained was dashed as FTN Cocoa Processors returned to the limbo and continued to struggle with negative bottom-line with a record of loss after tax of N39.065 million for the half year ended June, 2015.
The figure showed 86.59 per cent lower than N291.394 million losses after tax reported at the comparable period of 2014.
The company’s revenue in a filing with the Nigerian Stock Exchange grew by 251.7 per cent from N159.874 million in 2014 to N159.874 million recorded during the period under review.
FTN Cocoa ended the year 2015 with a loss after tax of N201.195 million; however showing 65 per cent lower than N577.204 million recorded a year earlier.
Livestock feeds, Plc also suffered the same due to the prevailing tough and difficult environment. The company, in its 2015 report made available to shareholders, explained that the feed milling industry encountered acute shortage of the major raw materials of maize and soya bean milk.
It explained that the prices of these products increased by almost 40 per cent, adding that the shortage of foreign exchange and the surge in exchange rate also affected the business as importation of certain ingredients became difficult and expensive.
Consequently, the company posted a profit before tax of N300 million, which represent 25 per cent decline when compared to N402 million achieved in 2014 while profit after tax declined stood at N187.9 million, 26 per cent loss over N254 million posted in the previous year.
Union Dicon Salt Plc (UDS), in its 2015 audited result posted a net loss of N2.6 million for the year 2015.
This is a percentage reduction of 96 per cent when compared to its audited results for 2014 when the company made a net loss of NGN87 million.
While the company’s operating expenses increased to N78 million compared to N61 million recorded in 2014, its administrative expenses crashed to NGN80 million from NGN148 million in 2014.
To address the plight of the manufacturers, especially in the areas of foreign exchange stability and boost their share price on the Exchange, industrialists recently appealed to the Federal Government to create alternative measures to enable genuine manufactures access forex for enhanced production.
Specifically, the Managing Director of Vitafoam Nigeria Plc, Taiwo Adeniyi lamented that under the new regime, forex supply to manufacturers is now classified under futures placement requirement, which takes 90 days before forex could be made available.
According to him, the first half of the year had been very challenging for the manufacturers due to scarcity and high cost of forex to source raw materials.
“The first half of the year was not too good for manufacturing sector. There was a lot of policy changing that took place but it is too early to think that it has not added any impact on the business yet.
“The first day it happened on June 20th, we have a release of so much dollar into the system and everybody thought it was going to continue that way but as I speak to you now we are having to do what is called future placement for request for dollar.
“Its tenured 30, 90 days for us to have access to dollar. And I asked a simple question to the Bank, if you are telling me that the next time I am going to get dollar to buy my material is in 90 days’ time what happened before the 90 days, I should fold my hands and then wait and the thing about it is that we are not even sure it will happened.
“We have been bidding for N282 to a dollar, we bided as at yesterday, we requested for some dollar, we bidden at N285, we didn’t get it and what we hear is that our bid was not successful. So it is still not clear. When should manufacturers go to get dollar to buy material and this is the question we have being asking government,” he added.
For the sector to record some reasonable level of improvement, especially in the current financial year, Adeniyi expressed the need for government to create a department with the responsibility of paying courtesy visit to the various manufacturing industries in Nigeria in order to understand their plight better.
“Manufacturers will always belong to the Manufactures Association of Nigeria (MAN) and there are several others organs of government that they can use to be able to know, you can imagine that Vitafoam has been around for 52 years. A committee can be set up to visit the companies and confirm.
“They have asked us, and we have filled document for raw materials research council to confirm that this is the materials use after all government issues licenses for us to import. If we were not producers, how would we have access licenses to import? So they know who the manufacturers are, they cannot claim that they don’t know.
The Managing Director of Livestock Feeds Plc, Larry Ettah explained that if government at all levels would focus on alternative means of income generation, it would boost the sector.
“Agriculture is viewed as a major alternative to oil in income generation and a means of boosting the economy. A lot of focus is therefore being placed on this sector which we believe may begin to yield fruit as the year progresses and will be beneficial to our industry.”
The Managing Director of DN Meyer Plc, Kayode Okuwa, explained that government should assist manufacturers by establishing companies that would serve as intermediaries for manufacturers in accessing foreign exchange.
“85 per cent of ingredients we use in manufacturing is imported while only 15 per cent is sourced locally. Government needed to assist us by having companies that would serve as intermediaries. This sector suppose to drive the nation’s economy,” he said
