Foreign-Owned Firms in Nigeria Face Investment Slowdown Amid Capital Decline
Foreign-Owned Firms in Nigeria Face Investment Slowdown Amid Capital Decline
Overview
Foreign-owned companies listed on the Nigerian Exchange (NGX) are expected to slow down capital investments in Nigeria due to a decline in capital returns, according to data analyzed by BusinessDay.
The Return on Capital Employed (ROCE), which measures how effectively a company generates returns from its capital investments, showed mixed results across companies. However, on a cumulative basis, capital returns declined from 25% in 9M 2023 to 18% in 9M 2024, signaling a potential slowdown in future investments.
Key Findings
• Despite reporting net losses for the nine months ending September 30, 2024, most of the companies analyzed achieved operating profits.
• The losses were mainly due to foreign exchange-exposed loans rather than operational inefficiencies.
• The report focused on foreign-held companies in the real sector where foreign corporations hold the majority stake. These companies include:
• MTN Nigeria
• Lafarge Africa
• International Breweries
• Nigerian Breweries
• Cadbury Nigeria
• Nestlé Nigeria
• Unilever Nigeria
• Beta Glass
• TotalEnergies Marketing Nigeria
Company-Specific Performance
1. MTN Nigeria
• ROCE: 25% (9M 2024), down from 32% (9M 2023)
• Operating Profit: ₦475.3 billion (9M 2024), down 22% from ₦607.5 billion (9M 2023)
• Operating Margin: 20% (9M 2024), a significant drop from 34% (9M 2023)
• Capital Expenditure: ₦161.6 billion (9M 2024), down from ₦242.9 billion in 9M 2023
Impact: The decline in capital returns signals possible cost-cutting measures and a slowdown in investments.
2. Lafarge Africa
• ROCE: 25% (9M 2024), up from 15% (9M 2023)
• Operating Profit: ₦130 billion (9M 2024), an 88% YoY increase
• Operational Efficiency: Higher operating margin, suggesting improved efficiency
Impact: Lafarge is expected to increase capital investments, given the strong growth in capital returns.
3. International Breweries
• ROCE: -28% (9M 2024), down from -12% (9M 2023)
• Financial Condition: Struggling despite a debt-to-equity conversion by ABInBev to ease liabilities
Impact: The company faces a financial crisis and requires a turnaround strategy to stay viable.
4. Nigerian Breweries
• ROCE: 14% (9M 2024), down slightly from 15% (9M 2023)
Impact: Despite a slight decline, Nigerian Breweries remains in a better financial position compared to International Breweries.
5. Cadbury Nigeria
• ROCE: 566% (9M 2024), up from 39% (9M 2023)
• Debt Management: Cleared long-term debt, relying only on intercompany loans from Cadbury Schweppes Overseas Limited
Impact: Strong capital returns indicate financial stability and growth potential.
6. Nestlé Nigeria
• ROCE: 17% (9M 2024), down from 37% (9M 2023)
• Challenges: Struggles in the Nigerian market have impacted capital returns.
Impact: The company needs to reassess its strategies to maintain profitability.
7. Unilever Nigeria
• ROCE: Stable at 11% between 9M 2023 and 9M 2024
Impact: The company has maintained steady performance compared to its peers.
8. Beta Glass & TotalEnergies
• Beta Glass ROCE: 25% (9M 2024), up from 12% (9M 2023)
• TotalEnergies ROCE: 61% (9M 2024), up from 32% (9M 2023)
Impact: Both companies showed strong capital return growth, signaling confidence in future investments.
Conclusion
The decline in overall capital returns signals a potential investment slowdown by foreign-owned companies in Nigeria, particularly in sectors heavily exposed to foreign exchange risks. While some firms, like Lafarge and Cadbury Nigeria, are experiencing growth, others, such as MTN Nigeria and International Breweries, may need to restructure their financial strategies.
As companies navigate Nigeria’s economic landscape, investment decisions will likely be cautious, with firms prioritizing cost-cutting and operational efficiency over aggressive expansion.
Overview
Foreign-owned companies listed on the Nigerian Exchange (NGX) are expected to slow down capital investments in Nigeria due to a decline in capital returns, according to data analyzed by BusinessDay.
The Return on Capital Employed (ROCE), which measures how effectively a company generates returns from its capital investments, showed mixed results across companies. However, on a cumulative basis, capital returns declined from 25% in 9M 2023 to 18% in 9M 2024, signaling a potential slowdown in future investments.
Key Findings
• Despite reporting net losses for the nine months ending September 30, 2024, most of the companies analyzed achieved operating profits.
• The losses were mainly due to foreign exchange-exposed loans rather than operational inefficiencies.
• The report focused on foreign-held companies in the real sector where foreign corporations hold the majority stake. These companies include:
• MTN Nigeria
• Lafarge Africa
• International Breweries
• Nigerian Breweries
• Cadbury Nigeria
• Nestlé Nigeria
• Unilever Nigeria
• Beta Glass
• TotalEnergies Marketing Nigeria
Company-Specific Performance
1. MTN Nigeria
• ROCE: 25% (9M 2024), down from 32% (9M 2023)
• Operating Profit: ₦475.3 billion (9M 2024), down 22% from ₦607.5 billion (9M 2023)
• Operating Margin: 20% (9M 2024), a significant drop from 34% (9M 2023)
• Capital Expenditure: ₦161.6 billion (9M 2024), down from ₦242.9 billion in 9M 2023
Impact: The decline in capital returns signals possible cost-cutting measures and a slowdown in investments.
2. Lafarge Africa
• ROCE: 25% (9M 2024), up from 15% (9M 2023)
• Operating Profit: ₦130 billion (9M 2024), an 88% YoY increase
• Operational Efficiency: Higher operating margin, suggesting improved efficiency
Impact: Lafarge is expected to increase capital investments, given the strong growth in capital returns.
3. International Breweries
• ROCE: -28% (9M 2024), down from -12% (9M 2023)
• Financial Condition: Struggling despite a debt-to-equity conversion by ABInBev to ease liabilities
Impact: The company faces a financial crisis and requires a turnaround strategy to stay viable.
4. Nigerian Breweries
• ROCE: 14% (9M 2024), down slightly from 15% (9M 2023)
Impact: Despite a slight decline, Nigerian Breweries remains in a better financial position compared to International Breweries.
5. Cadbury Nigeria
• ROCE: 566% (9M 2024), up from 39% (9M 2023)
• Debt Management: Cleared long-term debt, relying only on intercompany loans from Cadbury Schweppes Overseas Limited
Impact: Strong capital returns indicate financial stability and growth potential.
6. Nestlé Nigeria
• ROCE: 17% (9M 2024), down from 37% (9M 2023)
• Challenges: Struggles in the Nigerian market have impacted capital returns.
Impact: The company needs to reassess its strategies to maintain profitability.
7. Unilever Nigeria
• ROCE: Stable at 11% between 9M 2023 and 9M 2024
Impact: The company has maintained steady performance compared to its peers.
8. Beta Glass & TotalEnergies
• Beta Glass ROCE: 25% (9M 2024), up from 12% (9M 2023)
• TotalEnergies ROCE: 61% (9M 2024), up from 32% (9M 2023)
Impact: Both companies showed strong capital return growth, signaling confidence in future investments.
Conclusion
The decline in overall capital returns signals a potential investment slowdown by foreign-owned companies in Nigeria, particularly in sectors heavily exposed to foreign exchange risks. While some firms, like Lafarge and Cadbury Nigeria, are experiencing growth, others, such as MTN Nigeria and International Breweries, may need to restructure their financial strategies.
As companies navigate Nigeria’s economic landscape, investment decisions will likely be cautious, with firms prioritizing cost-cutting and operational efficiency over aggressive expansion.
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