February 2, 2017/InvestmentOne Research

We update our coverage of the Nigerian consumer goods sector with a near term negative outlook, given our expectation of weak unit growth due to shrinking   disposable income, as well as continued pressure on margins and consequently bottom-line figures from both FX related and  higher energy costs.

·         While the sector recorded appreciable topline growth largely due to price hike in the last two quarters, bottom-line figures had worsened significantly due to the negative effects of FX devaluation on inputs and finance costs.

·         With the exception of NESTLE and PZ which saw recovery in margin in their Q3 2016 results, margin performance was dismal across board for constituent of consumer tickers under our coverage.

·         From the foregoing, we remain bearish on the broad consumer segment in the immediate. However, over the medium to longer term, we expect the country’s demographic profile, as well as government’s efforts aimed at reflating the economy to bode well for players in this space.

·         Our rating across the universe of Consumer Goods tickers  under coverage are as shown below