INFLATION: Cost of sales in companies rise 29% to N5.4trn

At the backdrop of sustained inflationary pressures, companies have reported 28.8 percent Year-on-Year (YoY) increase in their cost of sales for the year ended December 31, 2023.

Nigerians, as well as companies operating in the country, have been battling with several adverse macroeconomic issues, especially inflationary pressure, high energy cost, and foreign exchange crisis, among others, which have now combined to spike companies’ operating cost.

Some of the leading companies Vanguard tracked numbering 20, posted N5.37 trillion in their combined cost of sales during the year compared to N4.17 trillion in the same period in 2022.

The companies are BUA Cement, Lafarge Africa Plc, Dangote Cement Plc, Flour Mills of Nigeria (FMN) Plc, Honeywell Flour Mills Plc, Mecure Industries Plc, Guinness Nigeria Plc, Champion Breweries Plc, International Breweries Plc, May & Baker Plc and Unilever Nigeria Plc.

Others are Nestle Nigeria Plc, NASCON Allied Industries Plc, Presco Plc, Cadbury Nigeria Plc, Neimeth Pharmaceuticals Plc, Dangote Sugar Refinery Plc, Fidson Healthcare Plc, Nigerian Breweries Plc and BUA Foods Plc.

vanguard ‘s findings from the companies’ financial statement showed that with the exception of Neimeth Pharmaceuticals Plc, which achieved a 36.2 percent decline in its costs, others recorded varying degrees of increases.

Two fast moving consumer goods manufacturing giants, BUA Foods and Unilever Nigeria Plc, recorded the biggest increase, as their costs rose by 64.2 percent to N468.98 billion and 61.4 percent to N67.86 billion respectively, followed by Dangote Cement with a 52 percent increase to N1.01 trillion.

Others in the top five category are: BUA Cement with a 39.1 percent increase to N276.04 billion; Fidson Healthcare (36.4% to N31.98bn), Cadbury Nigeria Plc (32.7% to N63.04bn), Flour Mills of Nigeria Plc (28.3% to N1.36trn), .

Analysing the impact of rising inflation and volatility in the foreign exchange market, economists at PriceWaterHouseCoopers, PWC, said that the twin macroeconomic challenges could drive up production costs and impact negatively on firms’ performance.

In a Nigeria Economic Outlook for August 2023, the firm cautioned on the high costs incurred by companies, saying: “To optimise costs across value chains, companies should conduct thorough analyses across the value chain. For overhead costs, they should examine benefits versus pay and consider greater segmentation of reward, implement a hiring freeze, and improve visibility of non-payroll expenses.

“Streamlining organisation design to eliminate duplication and reprioritising non-core work are also crucial. In brand marketing, a marketing audit should be conducted to enhance cost transparency, and marketing campaigns with high ROI should be prioritised while managing supply issues by reducing promotion frequency without compromising depth.

‘Lastly, in total supply chains, identifying alternative sourcing locations to minimise risk and cost, aligning procurement across business divisions, and optimising spending through global and local deals are essential actions.”