The 12 per cent return on investment recorded by the industrial goods segment of the Nigerian Exchange Limited (NGX), ranking the sector as the worst performing in the bourse last year, is unsettling investors.
Other segments outperformed the all-share index (ASI) at the end of the 2023 transactions by a modest margin, with only the industrial goods sector underperforming the index.
According to investors, with the 45.9 per cent rise in the index and close to 100 per cent returns achieved in other segments, it was expected that the sector would witness a tremendous leap during the period.
A review of the performance of other segments showed that the NGX banking index returned 114.9 per cent gain to investors while the insurance index rose by 84 per cent. The consumer index and oil and gas improved by 90 per cent and 125 per cent. The NGX index also rose by 45 per cent within the period.
Companies under the industrial segment are Cutix Nigeria Plc, Juli, Dangote Cement, Lafarge Africa, Berger Paints, Beta glass, BUA cement, Chemical and Allied products and Notore Chemical industries, Smart Products Plc, CAP and TRIPPLEG.
The industrial goods index had continued on a downward trajectory over the years. For instance, while the NGX ASI closed 2021 with a gain of 6.07 per cent to 42,716.44 basis points, the ASeM and industrial goods indices depreciated by 2.15 per cent.
Also, at the end of 2022, the sector depreciated by 5.96 per cent.
In 2023, the index showed a growth of 2.21 per cent in the first quarter. However, the growth declined to 1.42 per cent in the second quarter, resulting in a moderated first-half gain of 3.66 per cent. It posted marginal 0.25 per cent gain in August and 12 per cent in 2023.
The investors noted that the segment had performed poorly when compared to other sectors such as oil and gas, banking and consumer goods.
They linked underperformance of the sector to heavy liquidity challenges due to foreign exchange crisis, parlous infrastructure and high cost of operations, causing the bottomline of the stocks to remain subdued with apathy and gloomy outlook.
Recall that eight of these companies, including Berger Paints, Beta Glass, BUA Cement, CAP, Dangote Cement, MEYER, Notore and WAPC, reported a combined foreign exchange loss of N129.811 billion.
Head of Equity, Planet Capital, Paul Uzum, said the attractions in the sector are Dangote Cement, BUAcement and WAPCO
“Aside WAPCO, Dangote cement and BUAcement which have always been fairly priced due to the active intervention of the majority shareholder in the market, investors have ignored these stocks in search for those with strong fundamentals but poorly priced,” he said.
Managing Director of Wyoming Capital and Partners, Tajudeen Olayinka, said while other segments outperformed the ASI by a wide margin, only the industrial goods sector underperformed the ASI.
He said the performance is evidence of the poor state of demand for industrial goods in the country and a clearer picture of the challenging state of the economy.
President of NewDimension Shareholders Association, Patrick Ajudua, said the declining performance of the industrial sector, which is the highest employer of labour and contributor to tax revenue is of great concern to shareholders.
According to him, there is a need for the government to urgently address the plight of operators in the sector, especially in the areas of FX instability to boost liquidity and expansion.
He added that this would help reverse the negative position of many industries and increase the sector’s contributions to the country’s growth.
