The Consumer Goods Sector in 2018…

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Outlook for the Consumer Goods sector appears bright on many fronts. Pressure on revenue is expected to further subside as consumer spending recovers. Increased political spending is positive for consumption and revenue expansion. FX availability and a stable input cost environment will ease pressure on the Cost-to-Sales margins, boosting operating profit.

More importantly, the debt burden is expected to ease significantly in 2018, following observed efforts to deleverage balance sheets and boost profitability. In 2017 top names under our coverage raised equity capital by way of Rights issue. UNILEVER and GUINNESS were the early-birds, with both issuing Rights worth N58.9bn and N39.7bn respectively to defray the cost of debt servicing to their parent companies. UACN floated N15.4bn for the Group in addition to N6.97bn raised for all the subsidiaries excluding CAP Plc, FLOURMILL is in the process of issuing N40.0bn to its existing shareholders to salvage its worsening operating condition.

Finally, a moderately stable commodity price outlook in 2018 is positive for the sector. This together with a stable FX rate outlook should impact positively on margins going forward.

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