Nigerian paint companies are bleeding cash due to rise in cost of production, as inflation ate into their net profit between January to September 2022.
According to Prime Business Africa (PBA) analysis of three major paint manufacturers, CAP Plc, Berger Paints and Meyer Plc, the industry spent over N7.79 billion between Q1 and Q3 2022 to make their products available.
This is more than the combined N3.40 billion earned in profit after tax during the period in review. Also, their operational expense is closing in on the market’s turnover, as the former rose by 26.94 per cent, and the latter grew 38.90 per cent.
In Nigeria, costs of living and doing business have skyrocketed due to failure of the Central Bank of Nigeria (CBN) to tame inflation that hit 15.60 per cent in January 2022, but soared to 20.77 per cent in the month of September.
Prime Business Africa reports that the paint companies operating in Nigeria will continue to struggle with cost in the fourth quarter and going into 2023, as the last inflation report released by the National Bureau of Statistics (NBS) on Thursday showed the rate is 21.47 per cent in November, surpassing the 21.09 per cent reported in October 2022.
Nigerian paint companies: Breakdown of financials:
- Chemical And Allied Products (CAP) is the largest paint producer based on the market’s revenue share. The company produces Dulux paint brands.
- During the first nine months of the year, PBA gathered that CAP’s turnover grew by N3.86 billion, as it generated N9.19 billion within the period in 2022, surpassing the N13.06 billion revenue for last year’s period.
- The company recorded the highest growth in revenue and net profit, which went up by 116 per cent to N1.32 billion within Q1 and Q3 this year, in contrast to the N613.88 million recorded in 2021.
- CAP grew its net profit despite recording a 19.9 per cent (lowest rise compared to its rivals) rise in cost of sales, considering production gulped N7.79 billion in 9months of 2022, higher than the N6.50 billion spent a year before.
- Berger Paints also managed to grow its profit despite cost of sales burdening the bottomline thanks to a 30 per cent growth in revenue. The firm grossed N4.52 billion from sales of its products, raising the turnover above the N3.48 billion generated in first nine months last year.
- Similar to its market rivals, Berger Paints’ management was unable to tame cost between Q1 and Q3 2022, with the company spending N3.13 billion to produce its products. This is more than the N2.22 billion expended in the corresponding period of 2021.
- However, Berger Paints escaped a dip in its profit after tax, managing to raise it above the N118.20 million reported in the first nine months of last year, as it reported a PAT of N164.34 million. This is 39 per cent year-on-year growth.
- At the year end period of September 2022, Meyer generated N1.08 billion in revenue during the review period, which is N323.92 million more than the N759.15 million generated last year 9month.
- Unfortunately, the 42.6 per cent growth in revenue was not enough to save Meyer’s bottomline, as cost to manufacture its products rose significantly by 55.47 per cent, as the management disbursed N784.67 million to produce Meyer paints this year, compared to N504.70 million last year.
- The rise in cost of sales did more damage to the cash reserve of Meyer when compared to its market rivals, as Meyer Plc lost N26.79 million in net profit between first quarter and third quarter of 2022, against the N9.47 million the paint manufacturer reported as profit after tax in 2021.