Rising OpEx hurts packaging sector as listed firms incur nearly 20% YTD loss

•Shareholders seek govt intervention as firms under sector opt for delisting

The inactivity in the manufacturing sector, occasioned by the effect of rising inflation, high interest rates, forex issues, parlous infrastructure and other macroeconomic woes is currently hitting hard on listed firms under the packaging/containers industry, just as the bottom line of quoted equities had remained subdued with year-to-date loss of close to 20 per cent.

Listed firms under the sector are Tripple Gee, Grief Plc and Betaglass Plc. The major raw materials used in the packaging industry are glass, cartons, aluminium, caps, corks and plastic.

As the myriads of problems facing the manufacturing sector, being the major client who place orders and high demand for packaging products and containers remain unabated, the ripple effect on the packaging sector is currently impacting negatively on the bottom line and share price following negative sentiments that have trailed the stocks.

The development has become a source of concern to shareholders as they advocate for concerted efforts aimed at tackling ills militating against the growth of the manufacturing sector and by extension, the packaging industry in Nigeria.

Already, one of the firms, Grief Plc is currently finalising its process of delisting from the exchange and voluntary winding up of its operations, owing to rising operational costs and expenses (OPEX).

The shareholders noted that for the packaging industry to record any meaningful growth, their primary clients, the manufacturers must remain on a path of sustainable growth.

They also renewed calls for the government to establish companies that would serve as intermediaries for manufacturers in accessing FX, stating that the packaging sector is currently grappling with low-profit margins with capacity grossly underutilised. According to them, with the current situation, the sector may face massive job loss by the beginning of next year if urgent interventions are not taken to reverse the trend.

A look at the performance of companies under the sector showed that Tripple Gee’s result for the 2023 third quarter showed that sales stood at N433.99 million lower than N715.48 million achieved during the same period in 2022 while net loss was N99.63 million compared to net income of N82.38 million a year ago. Basic loss per share from continuing operations was N0.1007 compared to basic earnings per share from continuing operations of N0.0832 a year ago.

For the nine months ended December 31, 2023, showed that sales were N 1,572.97 million compared to N 2,193.77 million a year ago while net loss stood at N224.63 million compared to net income of N 101.16 million a year ago.

Similarly, for the financial year ended March 31, 2024, Triple Gee recorded a profit after tax of N7 million, indicating a decline of 94.30 per cent from N122.90 million achieved in the previous year.

Its finance costs, which rose by 173.89 per cent to N227.46 million, had a significant impact on the company’s performance while its turnover stood at N2.20 billion lower than N3.18 billion recorded in March 2023.

Tripple Gee began the year with a share price of N2.15 kobo but has since lost 15.4 per cent off that price valuation. Shareholders’ worries are compounded by the fact that Tripple Gee has lost 56 per cent of the stock’s value from September 26th to last Friday.

For Grief Plc, the company recorded a loss before tax of N245.2 million in the financial year ended October 31, 2018, representing a decline of 210 per cent when compared to profit before tax (PBT) of N77.5 million in 2017.

The company’s revenue also declined by 62 per cent to N534.6 million from N1.405 billion posted in the corresponding period in 2017. The company’s loss for the year stood at N262.5 million against a profit of N49.4 million in 2017. Shareholders’ funds stood at N98.8 million, representing a 73 per cent decline when compared to N361.424 million recorded in the previous year.

Also for the third quarter ended 31 July 2021, the company’s loss stood at N21.3 million, representing 62.7 per cent less than the N57.35 million reported in the corresponding quarter of 2020. The last time the company reported a positive performance was in the third quarter of 2017 after it posted N44.37 million.

The company’s Chairman, Adebayo Olowoniyi, said: “We have tried to navigate this difficult business terrain by recovering our costs through multiple price increases to our customers, cost reduction initiatives and improved efficiencies. However, we have not succeeded in that. We have lost our most important customer, halfway through the year and had to reduce prices to retain volumes, not fully recovering costs.”

Beta Glass began the year with a share price of N59.40 but has since lost 17.6 per cent off that price valuation.

A member of the Exceptional Shareholders Association of Nigeria, Olugbosun Ariyo said the way forward for the sector is for the government to stabilize the forex market and support local manufacturing with incentives.

He also stressed the need for the packaging firms to diversify into other sectors like agriculture and FMCG to reduce reliance on manufacturers.

“Without these steps, we may see more companies like Grief delisting, which would hurt investor confidence and returns,” he said.