The challenges in the country’s economy forced unprecedented production costs on major food processing companies in Nigeria in the past year. The development also affected the prices of commodities in the market, as the affected companies passed the costs to the consumers.
For instance, BUA Foods Plc and Dangote Sugar Refinery Plc reported that they incurred substantial input costs amounting to N1.45trn during the full year of 2024. This represents a sharp increase of 95.53 per cent compared to the N743.62bn recorded in the corresponding period of 2023.
This significant rise in expenditure underscores the challenging economic environment, characterized by heightened inflation and an unfavorable exchange rate, which have exacerbated the cost of goods and services across the country.
The companies’ input costs constituted 89.69 per cent of the total cost of sales, which stood at N1.62trn for the period under review.
This is an indication of the burden of rising expenses on the financial performance, particularly within the broader context of Nigeria’s economic landscape, where inflationary pressures have led to escalating costs across multiple sectors. However, because the burden is easily passed onto consumers, th companies still posted a rise in revenue.
For instance, the audited full year financial statements shows that the amount spent on input costs also represented 66.3 per cent of the total revenue recorded by the company, which reached N2.19trn in 2024, a marked increase from N1.17trn in 2023.
When broken down, the reports show that BUA Foods’ revenue grew by 109.3 per cent year-on-year to N1.53trn in full year 2024 as against N729.44bn posted in 2023.
This was due to a year-on-year increase of 74 per cent in Sugar to N733.8bn from N422.8bn in 2023, 172 per cent in Flour to N589.5bn compared to N216.7bn in 2023, and 125 per cent in Pasta to N197.6bn from N87.8bn the previous year.
The price that the company paid for that beautiful showing includes the cost of sales, which increased by 110 per cent to N987.10bn in 2024 from N468.98bn reported in 2023. That was driven primarily by an increase in the cost of raw materials and energy.
Another factor is the continued devaluation of the Naira against the US Dollar, which impacted raw material prices, leading to increased production costs.
The gross profit of the company increased by 108 per cent to N540.81bn in 2024 as against N260.46bn in 2023.
The report from Dangote Sugar shows similar challenges in the cost of production. The notable revenue growth, the financial performance of the company was adversely affected by soaring costs, leading to a significant pre-tax loss.
The company reported a pre-tax loss of N270.89bn for the financial year ending December 31, 2024, marking a staggering 148.7 per cent increase from the previous year.
Despite experiencing a 50.8 per cent year-on-year revenue growth to N665.69bn primarily driven by increased sales of refined sugar, profitability remained elusive due to the relentless surge in costs.
A further review of the financial statements reveals key financial metrics. Revenue stood at N665.69bn, reflecting a 50.80 per cent year-on-year increase. The cost of sales amounted to N634.58bn, up by 78.68 per cent year-on-year.
Gross profit declined by 63.95 per cent to N31.11bn, while selling and distribution expenses rose to N822m, representing a 27.52 per cent increase year-on-year. Administrative expenses climbed to N18.92bn, reflecting a 42.48 per cent rise year-on-year.
Operating profit dropped significantly to N12.67bn, a sharp decline of 82.57 per cent year-on-year. Finance income decreased to N7.61bn, down by 27.91 per cent year-on-year, whereas finance costs surged to N301.28bn, increasing by 49.40 per cent year-on-year.
The company reported a loss after tax of N192.62bn, a drastic 161.14 per cent year-on-year increase, while loss per share rose to N15.86, marking a 161.29 per cent year-on-year surge.
