Thursday, September 22Inside Business Africa

COVID-19 crisis shrinks Q3 scorecards of firms in household sector

The devastating effect of the COVID-19 on income, savings and consumption, have impacted the nine months performance of companies under the household/personal industry.

Indeed the sector, like its peers is faced with various challenges ranging from tight consumer spending poor infrastructure, rising inflation, trade and FX restrictions, porous land borders.

The above factors have been listed as the major ills militating against the growth of the industry, just as the sector has witnessed a sustained sliding profile in the last few years, exacerbated by the ongoing coronavirus pandemic.

The COVID-19 crisis has disrupted operations in different sectors of the economy with their trade segments, leading to a fall in demand, sales volume, revenue and underlying profits of these players.

The demand and supply disruptions caused by the pandemic coupled with weaker oil prices have laid the foundation for a looming economic recession.

The slump in global oil prices created FX illiquidity, thus posing a major challenge for players who depend largely on imported raw materials for production.

Additionally, the lockdown implemented in April to contain COVID-19 disrupted business activities, thus slowing sales during the period. The risk of the consumer goods sector being impacted adversely by the pandemic remains high.

The knock-on effect of the virus induced lockdown on the global and domestic value chain took a huge toll on the activities of quoted companies on the Nigeria Stock Exchange (NSE).

For instance, Unilever’s revenue for the Q3 2020 unaudited results also declined by 13.4 per cent to N44.7 billion from N51.6 billion recorded in the corresponding period in 2019.

The company’s loss before tax stood at N2.6 billion within the period while loss after tax stood at N2.1 billion. Its net assets also declined by 3.1 per cent from N66.5 billion to N64.5 billion.

Chief Executive Officer, Unilever, Alan Jope, said: “COVID-19 continues to influence consumer behaviours and channel dynamics in our markets. In North America, market growth continued to be driven by elevated demand for foods consumed at home.

“European markets saw a mixed picture on growth and a challenging pricing environment. In China, growth improved slightly compared to the second quarter. After a strict lock-down earlier in the year, India saw a pick-up in economic activity, even though cases of COVID-19 continued to increase. In Indonesia and Latin America markets contracted in the third quarter.

PZ Cussons’ revenue for the Q3 declined by -0.6 per cent to N54.7 billion from N55.1 billion in the previous quarter.

Loss before tax stood at N4 billion, while loss after tax stood at N3.5 billion.

Net Assets also declined by -8.6 per cent to N41.8 billion from N45.8 billion.

Analysts argued that the rising middle income class and steady economic growth positions Nigeria as an attractive investment destination for consumer players globally.

An independent investor, Amaechi Egbo, said the industry is not operating in isolation.

He explained that the industry is a reflection of the total state of the economy. “If the economy does very well, it will also benefit from it. If the power sector runs very well, what will happen? Of course, production will improve substantially.”

“Sluggish economic recovery, tight consumer spending and widening income inequality have slowed the growth in the consumer goods sector since the 2016 recession.”

He said the inability of the privatised power sector to increase output as envisaged, as a result of issues with gas supply and power distribution, rising inflation cost and decaying infrastructure continue to pose great challenges to businesses in the country resulting in maintenance and operation costs.

He also added that significant drop in government revenue and distortion in foreign exchange market led to the depreciation of the Naira.

According to him, this resulted in higher cost for all the company’s international operations.

Source: Guardian

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