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Worsening economy hobbles UAC, PZ, Leventis, others



PZ Cussons reports N113bn revenue, boosts profit after tax by 114% in one year
  • Key growth variables are lacking — Experts


They used to be Nigeria’s corporate pride and blue chips, as well as giants of the stock exchange. They belong to the Conglomerates category and used to be retirement investments for most people. Industry analysts also believe that owning these stocks was considered a status symbol. They also used to be the best employers both in terms of number and remuneration.

But times have changed for them and they seem to have entered their winter years. They are all in the Fast Moving Consumer Goods, FMCG, sector pulverized by dumping and high cost of production as a result of collapsing infrastructure, inconsistent policies and depressed economy.

Experts blamed the dwindling fortunes of these yester-years corporate titans on obsolete and inappropriate business models that have failed to respond to emerging business trends and challenges, as well as changing structure of the economy.

Even in the most developed economies, businesses fail. But managers of companies, more often than not usher in creativity and innovation to remain alive not only during the hard times but at all times, and this can also benefit the organization when the operating environment is business friendly.

Nevertheless, when businesses are faced with the twin problems of lack of innovation and a stifling operating environment, performance becomes much worseThree legacy firms, UACN PLC, PZ Cussons PLC and A.G Leventis (Nigeria) Plc seem to be facing the most troubling time of their lives presently.

Their books which have betrayed their disappointing conditions are all painted in the red. Many people both old and young still have fond memories of these conglomerates which dominated the market with their premium products in the days before the 1980’s.

Aside from their products dominating the food shelves of almost every household at that time, their stocks were also permanent features of almost every investment portfolio. They were household names which for a long time made the lives of those who used their products pleasant. They had consistently paid dividends as well as made many rich both as staff and investors in the company. They were categorized as blue-chip companies.

The companies

Nigeria is PZ Cussons’ largest and most diverse single market, operating in Personal Care, Home Care, Food & Nutrition and Electricals. It has been operating in Nigeria for 120 years and today employs over 3500 people.

UAC Nigeria also known as UACN was first incorporated in Nigeria under the name Nigerian Motors Ltd on April 22, 1931 as a wholly owned subsidiary of the United Africa Company Ltd, the firm that later became UAC International (UACI).At a point in time, the company managed 22 divisions and subsidiaries.

A large Nigeria-based conglomerate established in 1937, by Anastasios G. Leventis, the new company, although established at the height of the depression, expanded rapidly, and soon had branches even in all parts of the Gold Coast (now Ghana).

The company operates through numerous subsidiaries and affiliated companies, including Leventis Foods Ltd, Leventis Motors, Abuja (Capital Motors) Ltd, Mainland hotel, Leventis Real Estate, Druckfarben Nigeria Ltd, and Chrisstahl Nigeria Ltd.

Over the years, analysts believe that the persistent weakening of the economy has dealt a big blow to the companies which ones made Nigeria proud. Many industry analysts believe that it was the reputation of UAC that earned Chief Ernest Shonekan a position as an interim Head of State after the exit of President Babangida in Nigeria. But today the fortunes of these companies have taken a turn for the worse. Today UACN, PZ Cussons and A.G Leventis are all neck deep in huge losses.

For instance, UAC disclosed its further slide into the deeper red zone by more than 1,182 per cent from –N994, 290million to –N12.756billion in the nine months results 2019.

Similarly, with a loss before tax that is up by 435 percent from a huge loss of -N204.6million in 2018/19 and -N181.005 million in 2017/18, it has nosedived presently into a deeper loss of -N1.095billion

While A.G Leventis (Nigeria) Plc posted a loss before tax of –N844.64million which slid deeper to a loss of –N1.329billion in the third quarter 2019.


Investors in these companies are jittery at the rate at which the firms are losing grip in a highly competitive business environment as Nigeria. Some analysts fear that if this trend continues these firms that were once the pride of Nigeria may go the way of every mortal. There is a consensus in the market place that whereas it is easy to blame the weak economy for the degeneration of these companies, their management team may have lost focus in a digital age.

Dr. Olowokere of Financial Derivatives Limited, told Business Hallmark that the performance of these consumer goods companies will always reflect the economy of the nation given that they are fairly diversified.

According to him, the weak economy will be reflected in the poor performance of these companies because it will reflect inflation, unemployment and the size of the pockets of the workers whose purchasing power is also shrinking.

‘’These companies reflect the general fundamentals of the economy. Sometimes they can adjust to inflation and push up their prices higher which may push customers to change the choice or taste’’

Analysts have blamed the company’s poor performance on the weak economy and security challenges from the religious sect, Boko Haram and the various assaults on farmers by Fulani Herdsmen.

Stakeholders say deep challenges emanating from a tough macro-economic environment in Nigeria have been hard on manufacturers. They have argued that further problems faced by local manufacturers include, but are not limited to, the volatility of the forex market, and high lending rates which hover between 25 and 30 per cent. Other challenges include shrinking sales income, unemployment and high inflation, which is on the rise again, and has now moved on to 11.6 per cent.

More worrisome to the companies are the unfair competition with China whose products are much cheaper in the market.

An activist shareholder who would not want his name mentioned in print told Business Hallmark by way of a telephone interview that the weak economy has not only affected the purchasing power of Nigerians, the company was facing the same challenges of harsh operating environment as other manufacturing firms in the country. He advised these firms to watch its source of funds and borrow less.

‘’The economy is bad and the competition is becoming very high for the little money in circulation.

Not many organisations can do much in such an environment’’, he added.

Lagos based analyst, Managing Director of High Cap Securities Limited, David Adonri explained that security challenges especially in the Northern part of Nigeria have posed serious problems for manufacturers to sell their products in the affected areas.

Companies such as PZ Cussons, UACN and A.G Leventis appear to be having the most challenging period following the huge losses it has posted.

Whereas these companies are going through their most discomforting times, Nestle Nigeria and Cadbury Nigeria seem to be coasting home with impressive performances. Both Nestle Nigeria and Cadbury grew their profits by 17.6 per cent and 277 per cent respectively in the third quarter ended 2019. However, over the years, analysts argue that manufacturers have faced more excruciating challenges in the last four years than ever before.

A Lagos based analyst, former chief economist of Lagos Chamber of Commerce, Dr. Vincent Nwani, told Business Hallmark that the variables for good and impressive performance for businesses in Nigeria are lacking presently. Nwani said the manufacturing sector which contributed a negative per cent to the Gross Domestic Product given the NBS report that has just been released could not perform magic under conditions lack of power, lack of motorable roads and insecurity.

According to him, businesses are also suffering under the weight of multiple taxes which is aggressively collected by the government.

‘’In fact, these companies that mentioned may be having management issues’’ he added.




PZ Cussons Plc

Shareholders of PZ Cussons Nigeria do not appear excited with the recent performance of the company; more so when its drift to the south became more pronounced in the first quarter 2019/2020 with a loss before tax of –N1.095 billion, representing 435 per cent deeper into the red region up from the loss of -N204.6million recorded in 2018/19. Instead of closing up on the losses of the previous era, the company is now seemingly drifting further off into the woods.

Underscoring its problems, PZ Cussons generated a paltry revenue increase of 0.5 per cent in the same period under review.

Peering through the numbers, high interest costs at N123.4million and low interest income at N77.662million could be partly responsible for the company’s misfortune.

Also challenging for the company was its selling and distribution costs which stood higher at (N2.285billion) as against the N2.247billion it had recorded in 2018/19. While revenues remained low at N15.808billion, cost of sales rose by 15.2 per cent from N11.363billion to N13.094 billion in 2019/20.

Stakeholders in the company are already wearing long faces as their shares in the company buckle under the weight of falling market yields. PZ’s performance in the first quarter of the year has been starkly disappointing.

This weakness is reflected in the company’s losses in the first quarter of the 2019/20 financial year. With a loss before tax that is up by 435 percent from a huge loss of -N204.6million in 2018/19 and -N181.005 million in 2017/18, it has nosedived presently into a deeper loss of -N1.095billion. Clearly, shareholders may remain in the woods for some time to come. In the last five years, the company’s annual reports reveal that its fortunes have been on the decline as profit plunged by 70 per cent from N6.556billion in 2015 to N1.942billion 2019. Today the company is deeply in the red zones.

PZ posted declining revenues as inventories went up steadily.

Receivables rose 21 per cent, indicating that the company’s products are struggling to find buyers as fewer goods get sold. PZ’s forex losses, though lower than that 2018/19, was high at N63.8 million as operating profit equally plunged into the red by 365 per cent from N385 million in the corresponding period of last year to –N1.024billion in 2019/20.

In its end of year results in May 2018, PZ Cussons Nigeria had posted a revenue growth by three per cent to N80.6bn higher than the N78.2bn recorded in the previous year. The company’s revenue growth came in spite of drop in operating profit and profit after tax by 37.7 per cent and 47.7 per cent, respectively, relative to the previous financial year.



Shareholders of UACN are beginning to imagine how much hole the disappointing performance of their company will create in their pockets at the end of its 2019 annual year end. The company’s third quarter results are indeed discomforting. A reflection of this is disclosed in its further slide into the deeper red zone by more than 1,182 per cent from –N994,290million to –N12.756billion in 2019.

Its revenues rose 12.66 percent to N60.5billion in 2019 from N53.7billion achieved in 2018. But cost of sales also rose 11.7 per cent from N43.24billion in 2018 to N48.32billion in 2019. While operating profit rose 106 per cent from N3.171billion in 2018 to N6.552billion in 2019, Basic earnings were negative at -407kobo.


A critical review of the company’s nine month’s financial statement shows that while inventories almost reduced by half from N30.5 billion in 2018 to N16.032billion in 2019, total assets also dropped 13 per cent per cent from N131.09billion to N112.86billion in 2019.

This is an indication that all may not be well with UACN. Whereas the former giant company posted a modest profit before tax of N2.127 billion in the last 3 months from June 2019 to September 2019, its deep and grave condition has not changed as reflected in its balance sheet which reveals N16.232billion loss.

In 2018, the company had said: ‘’The Group incurred a loss before tax of ₦5.5 billion in FY 2018, compared to a ₦3.2 billion profit in FY 2017. The 2018 loss was driven by the non-cash expenses incurred by UPDC in 2018 though this was partly offset by a significant reduction in net finance costs (down 53.6% Y-o-Y). Gross finance costs decreased by 19.4% Y-o-Y, driven by debt repayments and reduction in average interest rates (from 23.5% in FY 2017 to 18.2% in FY 2018). Finance income increased by 60.1% Y-o-Y, on increased interest income on the cash proceeds from the 2017 rights issue and on higher cash generation in Paints and Packaged Foods,’’ its management also explained,

‘’Revenue declined 11.7% Y-o-Y to ₦78.7 billion in FY 2018, mainly due to the Animal Feeds & other Edibles segment, where current market dynamics were driven by intense price-based competition. Challenging market conditions in the Nigerian real estate sector resulted in lower revenue for the Real Estate segment, due to reduced housing inventory sales from limited development activity. Although Packaged Foods (up +11.9%), Logistics (up +41.5%), Quick Service Restaurants (up +12,6%), and Paints (up +12.1%) delivered revenue growth during the year, this only partially offset the decline in the animal feeds and real estate businesses’’.


A.G Leventis (Nigeria) Plc

The harsh operating environment had its toll on AG Leventis which posted a loss after tax of -N904.258 million for the nine months ended September 30, 2019 as against a loss of -N574.361 million reported in 2018.

It Loss before tax slid deeper at -N1.329 billion from N844.648 million posted in 2018 just a the group’s revenue declined by 33.24 per cent from N8.210 billion in 2018 to N5.481 billion reported in 2019.

The company was able to cut its Cost of sales to N4.260 billion in 2019 as against N6.274 billion posted in 2018.

The group had sustained loss position during half year ended June 30, 2019 with a total compressive loss for the year of N282.292 million as against N545.904 million reported in 2018.

The company posted loss before tax of-N415.136 million from -N802.800 million in 2018 while cost of sales was N3.033 billion as against N5.423 billion posted in 2018.

Revenue dropped by 42.75 per cent to N3.960 billion as against N6.918 billion reported in 2018.

Chairman, AG Leventis, Ahmed Kazalma Mantey, speaking at the group’s 59th Annual General Meeting (AGM), said: “The effect of the recession in our economy continued to impact adversely on our operations as there was a reduction in credit opportunities which in turn affected our income.

“This harsh environment along with the continued lag in infrastructure especially power and road network added to our cost of doing business. Nevertheless, we strove to ensure that we continued to develop our business as much as possible.

Despite their weak performances, in the capital market, UACN shares have gained 72 per cent year-to Date, PZ Cussons stock appreciated 82 per cent while investors in A.G Leventis lost 10 per cent Year to Date.

Recently, the Nigerian economy has remained weak at a GDP growth of over 2 per cent in the third quarter 2019


According to National Bureau of statistics latest report on the economy,’’ Gross Domestic Product (GDP) grew by 2.28% (year-on-year), in real terms, in the third quarter of 2019. Compared to the third quarter of 2018 which recorded a growth of 1.81%, the real GDP growth rate observed in the third quarter of 2019 indicates an increase of 0.47% points. Relative to the second quarter of 2019, which recorded a growth rate of 2.12%, Q3 2019 represents an increase of 0.17% points. On a quarter on quarter basis, however, real GDP grew by 9.23%. The growth rate in Q3 2019 represents the second highest quarterly rate recorded since 2016.’’

It is difficult for businesses to grow above the average growth of its economy, experts have almost always held. And this is a point that was also to be corroborated by the investor, Jimoh Ibrahim in the course of an interview with BH earlier in the year. And this then returns the ball to the courts of the authorities to do the needful in ensuring that the national economy is urgently rejuvenated.

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