Investors count losses as Nestle, NB, others post over 25% YTD losses

Investors, who staked their funds in fast-moving consumer goods’ (FMCGs) stocks may need to wait longer for capital appreciation as prolonged inflation, foreign exchange (FX) crisis, unemployment and overall macro-economic challenges have dealt a huge blow to consumers’ disposable income and caused five listed companies to record over 25 per cent losses in value year-to-date (YTD).

This is just as the bottom line of these quoted companies remains subdued by shrinking profit margins and poor returns in the last few years, while investors continue to count their losses.

Already, analysts have projected that most of these affected companies may not bother about dividend payments even if they record gains until they fully recover from the losses because they have holes to plug in the previous years’ operations.

At the end of yesterday’s transactions, five firms, including Nestle, Nigerian Breweries (NB), Dangote Sugar Refinery (DSR), National Salt Company of Nigeria (NASCON) and Champion Breweries with market capitalisation of N1.5 trillion, recorded over 25 per cent loss in valuation since the beginning of the year.

For instance, Nestle with market capitalisation of N642 billion began the year with a share price of N1,100.00 but at the close of transactions yesterday, September 4, 2024, the share price closed at N810, shedding 26.4 per cent YTD.

Similarly, NB, which re-opened for transactions in January 2024 at a share price of N36, closed yesterday at N27, dropping by 25 per cent. The company closed its transactions on Wednesday with capitalisation of N277 billion.

For DSR with capitalisation of N3.97 billion, its share price declined by 37.4 per cent YTD from N57 to N35.70 kobo. NASCON’s share price depreciated from N53.75 kobo to N34 dropping 36.7 per cent from the price valuation. The company’s capitalisation is currently put at N91.9 billion.

Champion Breweries with capitalisation of N26.5 billion began the year with a share price of N4.15 kobo. The firm has shed 28.7 per cent of its price valuation YTD to close at N2.96 kobo yesterday.

The consumer goods firms are currently bogged with heavy financing and operating costs, worsened daily by rising inflation, unemployment and underemployment, resulting in a reduction in the demand for fast-moving consumer products with the attendant effect on revenues and profits.

In its half-year (H1) 2024 operations, Nestle’s pre-tax loss stood at N252.5 billion, representing a 165 per cent decrease from the N69.1 billion pre-tax loss posted in H1 of last year.

NB recorded a loss of N85.2 billion in the first six months of 2024, up from N47.6 billion recorded in the same period in 2023.

The new increment in pump price is expected to push production costs and with adverse effect on the financial position. With the current situation, many listed firms would plunge into a loss position while dividend payout would be affected by 100 per cent with the current situation.

Vice President of Highcap Securities, David Adonri, said economic reforms and rising rural insecurity have exacerbated inflation, eroding the purchasing power of consumers and escalating the cost of production in recent times.

According to him, these are depressing the profit of several companies and may delay the recovery of the manufacturing sector which was severely wounded by FX losses due to floating of the Naira. Consequently, he added that payment of dividends is unexpected like in the previous year, especially by manufacturers.

President of the New Dimension Shareholders Association of Nigeria, Patrick Ajudua, urged the government to create an enabling environment for businesses and reconsider the reduction of fuel and diesel prices to enhance listed firms’ profitability and dividend payout for investors.

He pointed out that the inflation rate of 34 per cent and MPR ratio of 26.75 per cent is a huge disincentive to investment.