Vetiva Research (“Vetiva”) recently released its H2’22 outlook report titled “A strange
Labyrinth”. In the Consumer Goods sector report, Vetiva examined factors surrounding
and driving FMCGs’ thriving performances and the expectation for the next half year.
Chinma Ukadike, the Consumer Goods Analyst at Vetiva believes that whilst the trend of
impressive revenues and bottom-lines across the consumer goods sector has been driven
by the growth in volume as evidenced in the sector’s GDP performance, the real headliner
is pricing, which has acted as a tailwind for growth in the sector. Meanwhile, she admits
that the role of demand is not to be underplayed, despite the crunch to consumers’ wallets
from increasing energy tariffs, lingering pandemic effects and overall inflationary
pressures.
In her outlook, whilst she expects the headwind from consumer disposable income to
persist, she shared an optimistic view on volumes, which she linked to the expected rise
in election spending for the second half of the year. Still, she highlighted the reopened
Northern borders as a potential threat to local volumes. On the other hand, she still sees
a sluggish half year for consumer discretionary players, given price levels and the state of
consumer wallets.
Referring to the impact of the Russia-Ukraine crisis on FMCG players, Chinma stated that
skyrocketing input prices as a result of global supply deficit leaves the industry’s margin
on a delicate balance. She expects that, with the recent pricing hike across board,
producers may be unable to really respond with further hikes if costs escalate further.
Additionally, whilst margins are currently strong, with FX sourcing remaining a challenge
and rates depreciating further in the parallel market, producers would be hard pressed to
maintain the status quo. Nonetheless, given that PAT grew by an average of 50% y/y in
Q1, she expects PAT growth to average 2x to 2.3x for the FY’22 period
As the general elections draw closer, Chinma expects investors to become increasingly
wary of political tensions and uncertainties. However, she does not expect swift sell-offs
across the board, given the fundamentals that have driven the current rally. Overall, she
expects the brewers to see continued, albeit dampened, positive sentiment in the second
half of the year, riding on sustained positive bottom-lines.
Vetiva is a Pan-African Financial Services Company incorporated in Nigeria and duly
regulated and registered by the Nigerian Securities & Exchange Commission (“SEC”) to
carry on business as an Issuing House and Financial Adviser. Also, the company, through
subsidiaries, is registered to act as Fund/Portfolio Managers, Trustees and Broker/Dealer
by the Nigerian SEC.
