Despite marginal revenue growth in Q2 2023, a wide range of Nigerian companies have reported substantial reductions in their profit margins.
The downturn is consistent across sectors, excluding banks and insurance firms, according to recently released financial statements.
A survey of the second quarter results of about 28 companies cut across manufacturing, telco, oil and gas, and consumer goods companies reveal their profit margin dipped to just 2.53 per cent in the second quarter of 2023. This compares to 15.63 per cent in the first quarter of 2023 and 14.35 per cent in the second quarter of 2022.
Whilst the companies reported a combined revenue of N2.67 trillion in the quarter under review (N2.369 trillion in Q1), their profits dipped to N67.5 billion (compared to N379.3 billion in Q1 and N302 billion a year earlier).
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Beta Plc, a leading manufacturing firm, reported a Q2 2023 revenue of N14,857.99 million, showing little change when compared to N14,983.72 million in Q1 2023.
However, their profit after tax for the quarter was N2,159 million, only a slight increase from N1891 million in the previous quarter.
Similarly, BUA Foods, one of Nigeria’s top food production companies, announced a Q2 2023 revenue of N176,611.95 million, a substantial increase from N144,318.35 million in Q1 2023.
Despite this, the company’s profit after tax for Q2 rose to N54,648 million, which is not proportional to the increase in revenue.
BUA Cement also reported profitability growth. These were the only few companies that reported improved margins. The rest reported profitability dips.
Two other companies, Cadbury Plc and Dangote Sugar, reported concerning drops in their profit margins. Cadbury Plc registered a Q2 2023 revenue of N19,044.63 million but saw a dramatic decrease in profit after tax swinging into a loss of N17.9 billion.
Meanwhile, Dangote Sugar revealed its Q2 2023 loss after tax as N40.79 billion, a significant decrease from N11.3 billion same period in 2022, even though revenues rose slightly. (Source: nairametrics)
