Low purchasing power, unhealthy competition hit printing sub-sector
The earnings of companies, under the printing sub-sector, listed on the Nigerian Stock Exchange (NSE) have remained subdued with negative sentiments due to policy issues and low purchasing power.
Indeed the sector is currently grappling with heavy financing and operating costs, even as manufacturers are still faced with enormous challenges that are largely responsible for its poor performance in the nation’s bourse in the last few years.
Due to the emergence of technology, which has developed the electronic system of learning (e- leaning) , in addition to poor purchasing power of the average Nigerian, worsened by foreign exchange issues, rising inflation, there seems to be a reduction in the demand for printing products with the attendant effect on revenues and profits.
Also, the industry is contending with a high cost of an operation mainly due to ports congestion and the high tariff on importations, as well as unhealthy competition, putting a financial burden on the sector.
Moreso, the weak corporate earnings by these companies is coming on the heels of increase in cost of sales and administrative expenses as most companies operating in the country battled hike in materials used for production, among others.
At the 55th yearly general meeting of Academy Press Plc, shareholders urged the government to address the issue of high import tariff on raw materials to accelerate the growth of the industry and boost the bottom line of listed firms under the sector
Specifically, the President of Constant Shareholders Association, Shehu Mallam Makail, said there is a need for government to work out incentives for companies under the sector to alleviate their financial burden.
“There are a series of challenges the printing firms are facing currently, ranging from lack of incentives, high-interest rates, operations cost, and stringent government regulations. The raw materials are expensive with most of them struggling under multiple taxations.
“These numerous challenges does not boost these firms’ bottom-line and revenue, it does not encourage others to venture into such business. The government must ensure that unity schools patronize the local printing industry and also ensure that the culture of reading is restored in Nigeria.
The Managing Director of the company, Olugbenga Oladipo, said government unfavorable policies are hitting hard on the operations of the local printing industry.
According to him, because the operators cannot pass the high cost to the consumer, it has continued to erode their working capital and impact negatively on the profitability.
He noted that the company’s revenue grew by 11.46 per cent to N2.43 billion from N2.18 billion in the previous year, while profit before tax grew by 112.9 per cent to N1.324 million from a loss of N10.27 million recorded in the previous year.
“It has not been easy for the local industry, it is not peculiar to our own industry alone. What is affecting us is actually external to us and affect other manufacturing industry too because the moment the cost of operation is high, with a high cost of forex, it falls back on us because we can not pass the cost on to the consumers.
“The consumers are challenged, we sell to end-users who are ordinary street people and the moment their purchasing power is not strong, it falls back on us. Again, the government is also not helping with their policies.
For instance, the problem of port congestion and the high tariff on importation is also affecting our bottom line.
“Even some of our products are brought through the back door, causing unhealthy competition. So these issues are making us be less viable. Government businesses are also still going to foreigners.
“The books supplied by government are finding their ways to foreign organisations, they will say they give you order but they already know that you are not a producer, the only way to get supply is that you go abroad and they neglect the local player.
“The cost of forex is still very high and we are not able to pass that cost to consumers. Even getting stock material, the working capital is enormous, you need to have a lot of cash to do good business and the banks are not giving a loan, even when they lend, it is so expensive, you find it difficult to pay back,” he said.