Though raw materials import with its attendant foreign exchange burden has remained a militating factor, it is not the only factor responsible for the less than sterling performance of paints manufacturers.
Other challenges facing the industry include a dearth of infrastructure, especially stable electricity supply, poor road network, multiple taxations, stiff competition and high import duties and tariffs, among others.
For instance, even years after the privatisation of the power sector, manufacturers are yet to see any appreciable improvement in electricity supply, forcing them to rely heavily on in-house power supply at a huge cost. Yet, power constitutes the single critical infrastructure to boost the manufacturing sector and create jobs
According to market watchers, these factors contribute to the high cost of production, which is said to be responsible for the high cost of goods produced locally compared to imported ones. The cheaper price of imported goods is blamed for the penchant of Nigerians to patronise imported goods to the detriment of locally produced goods. This is why many local industries, including paints manufacturers that could not stand the heat of the competition in the same market with imported goods, are fast disappearing from the industrial landscape.
Also, domestic constraints such as depletion of fiscal buffers, dwindling foreign reserves, among others have remained hydra-headed monsters to the business operating environment.
Market watchers also believe that for the paint industry to survive, more is needed to be done in order to totally curb the problem of counterfeiting. Individual companies must also be able to come up with technological innovations that will help counter the activities of counterfeiters.
Following the vagaries of these challenges, Meyer Paints Plc’s earnings have continued to see fluctuation in recent times.
Performance metrics
The company’s financials tracked by Nairametrics showed that high operational cost has continued to weigh down on Meyer Paints Plc’s earnings.
- The paint firm returned to profitability during the first quarter ended March 31, 2021, with a profit after tax of N5.677 million as against a loss after tax of N24.988 million in 2020. Profit before tax stood at N8.110 million from a loss of N23.998 million in 2020.
- The group’s revenue dropped by 1.80% to N223.473 million from N264.406 million in 2020 while cost of sales stood at N145.155 million from N166.623 million a year earlier.
- Hopes by market watchers that the firm would sustain profitability was dashed as Meyer slipped into a loss position with a loss after tax of N9.3326 million for the half-year ended June 30, 2021, as against a loss after tax of N60.731 million in 2020.
- However, revenue for the period grew by 23.22% to N485.461 million from N393.965 million in 2020. Cost of sales stood at N331.462 million in 2021 from N252.860 million recorded the previous year representing a growth of 31.08%.
- Meyer Paints reverted to profitability during the nine months ended September 30, 2021, as the profit after tax stood at N9.474 million as against a loss after tax of N100.528 million posted in 2020. Profit before tax was N13.534 million from a loss before tax of N98.404 million recorded the corresponding period of 2020. Revenue grew by 34% to N759.157 million in 2021 as against N566.511 million posted in 2020. But cost of sales rose by 40% to N504.702 million in 2021 from N360.414 million in 2020.
- However, hopes that the firm will sustain its profitability seem a mirage the high cost of operational costs led the profit after tax for the period ended December 2021 to decline by 64.38% to N39.816 million from N1.118 billion in 2020. Profit before tax equally dropped by 64.25% from N1.38 billion to N58.553 billion in 2021.
- Revenue grew by 35.08% to N1.118 billion from N827.559 million in 2020 while cost of sales rose by 54.71% to N725.733 million from N469.085 million in 2020.
- The paint firm began the 2022 financial year on the low end to record 15.14% decline in profit after tax to N4.817 million for the first quarter ended March 31, 2022, as against N5.677 million recorded in 2021.
- Profit before tax dropped by 11.99% to N7.137 million in 2022 from N8.110 million in 2021. However, revenue grew by 52.95% from N223.473 million in 2021 to N341.804 million in 2022. Cost of sales grew by N73.66% to N252.075 million from N145.155 million in 2021.
Operational challenges
- Speaking at an Annual General Meeting (AGM), the Chairman of the company, Mr. Kayode Falowo said that the year was indeed a very tough year for the group as a business.
- “Although, the year started on a bright note leveraging on the good performance of the previous year, by half-year the business started to record a downturn that lingered till end of the year. The challenges the business faced were both external and internal in nature and these significantly impacted our performance as a business.
- “We struggled to gather some momentum in the last two months of the year but obviously, that was not good enough to bring about the desired change in the fortune of the business.
- The forex impact in terms of availability, accessibility and exchange rate was huge and significantly affected our business, as almost 90 per cent of our raw materials are imported. This further weakened our working capital base and management had to devise some ingenious ways to stay afloat. You will recall that several manufacturing companies stopped doing business in the heat of the crisis. We however managed to keep the factory opened although our capacity utilization dropped significantly,” he said.
What you should know
- Meyer Plc (formally DN Meyer) is a manufacturer and marketer of paints.
- The company was incorporated on 20th May, 1960 and subsequently converted to a public company in 1979.
- Meyer Plc is an offshoot of the former Hagemeyer Nigeria Limited, the manufacturer of Sigma Paints and Cosmetics. In 1994, Hagemeyer was bought over by Dunlop Nigeria Plc, which led to the change of both the corporate and brand names to Meyer Plc and Meyer Paints respectively.
- Meyer Plc is listed on the Nigerian Stock Exchange (NGX) and is currently the 119th most valuable stock on the NGX with a market capitalization of NGN 1.34 billion, which is about 0.0048% of the Nigerian Stock Exchange equity market.
- Meyer began the year with a share price of 0.46 kobo to close yesterday at N52 per share on the Nigerian Stock Exchange (NGX)and has since gained 448% on that price valuation, ranking it second on the NGX in terms of year-to-date performance.
