Based on 9M-2019 earnings, performance consumer good companies remained pressured by weaker consumer wallets and tougher operating environment. For context, only UACN recorded growth in both Revenue and PAT from continuing operations in Q3-19. Notably, UACN’s real estate segment (UPDC) was re-classified as a discontinued operation in the Group’s Income Statement for the period. Elsewhere, despite managing to grow Revenue by 2.4% y/y in Q3-19, NESTLE’s PBT (-0.6%) and PAT (-9.1%) decreased y/y, dragged by rising production and operational expenses. More surprising, UNILEVER’sQ3-19 Revenue slumped 62.9% y/y which according to management was linked to tighter credit terms with key distributors in a bid to minimize nonperforming receivables.
The performance of Flour Millers (FLOURMILRevenue: -0.5%y/y, PAT: +17.4%) and Sugar Refiners (DANGSUGAR- Revenue: +13.4%y/y, PAT: -6.7%) improved slightly, thanks to positive development in the traffic situation at Apapa port and partial closure of land borders which helped to curb smuggling activities, late in Q3-19. Though pressures from operating costs remained (OPEXFLOURMIL: +14.1%, DANGSUGAR: +56.9%). For Brewers, performance remained underwhelming amid tight consumer wallets and intense competitions. Additionally, all sector participants recorded massive growth in Net Finance cost (NB: +139.6%; GUINNESS: +143.8%; and INTBREW:+116.4%).
Our overall outlook for the consumer goods sector in Q4-19 is not overly positive due to myriads of macro bottlenecks that continue to weigh on operating performance.
UNITED CAPITAL PLC
