Listed firms groan over rising OPEX, 71% surge in energy cost

The high cost of energy continues to take its toll on businesses in the form of high production cost, with two companies spending a total of N660 million in energy cost in the first half (H1) as against N385 million recorded in the corresponding period in 2023.

The two firms: Cutix Nigeria Plc and Academy Press Plc recorded 71.4 per cent rise in the cost of energy in 12 months, from 2023 to H1, 2024.

According to the firms, this has translated into declined profit margins and low turnover and sales, challenges that have created serious sustainability concerns for the companies.

A breakdown of the figures showed that between January and June, 2024, Cutix expended a total of N420 million in energy, higher than N214 million recorded within the same period in 2023 while Academy press expenses rose from N171 million in H1 2023 to N240 million in H1 this year.

Managing Director of Academy Press Plc, Olugbenga Ladipo, decried that the cost of input and energy cost increased astronomically between 100 and 300 per cent.

He argued that one of the major reasons most listed firms have turned moribund in the past was due to the high cost of production, occasioned by the high cost of diesel and fuel.

This, in addition to the persistent rate hike, has continued to impact the repayment of existing loans.

According to Ladipo, the cost of borrowing from commercial banks, currently over 30 per cent is another major constraint to investment growth and profitability.

Ladipo said the sector is currently grappling with a deteriorating employment rate and low-profit margin with capacity grossly underutilised.

He recalled that many businesses have suffered serious dislocation as a consequence of foreign exchange liquidity challenges, volatility and the depreciation of the local currency, even as output has declined significantly in many industries because of the challenges of accessing raw materials.

“We are just grappling to survive and waiting for policies to turn things around. Businesses cannot afford this cost. One can imagine what this has done to production costs. It is unaffordable.

“Our markets are now for the few who could afford the cost. This is the misfortune across sectors,” he said.

He stressed the need for the country to increase its production level and repair local refineries to reduce petroleum product importation and boost foreign exchange earnings.

Chief Executive Officer of Cutix, Ijeoma Oduonye, said the rising energy cost increased its operating cost, impacting profitability and ability to increase shareholders’ value through payout.