By NKIRUKA NNOROM

Consumer goods companies listed on the Nigerian Stock Exchange, NSE, may likely post weak earnings in the first quarter of 2014, a research report by CardinalStone Partners, has shown.

Some of the consumer goods companies listed on the NSE include Nestle Nigeria Plc, Nigerian Breweries, Cadbury Nigeria Plc, Guinness Nigeria Plc, FlourMills of Nigeria Plc, Honeywell Flourmills, UACN, Unilever, Dangote Sugar Plc, and Dangote FlourMills Plc among others.

In a report titled, ‘Q1’14 and Q4’13 Earnings Preview: Slower Q1 In View for FMCG Names’, the firm stated that while majority of the companies have released 2013 numbers with impressive outcome, issues around rising insecurity in the north east, which is expected to hamper distribution of goods and services in that region, as well as volatility in input prices would impact negatively on their earnings by the end of the first quarter.

They observed that these are in addition to the usual slow down that characterises the calendar Q1 period as households recover from yuletide season expenses.

“We expect the worsening state of security in the North Eastern region (evidenced by the heightened pace of Boko Haram attacks) to hamper product distribution of consumer goods companies in the region.

“Input price movement would have different impacts on consumer companies depending on the input material used. For instance, sugar and sorghum prices have risen three percent and nine percent respectively for the year, while oil palm is down one percent and wheat prices have generally been flat over the same period,” it said.

The report noted that recovery in raw sugar prices is expected to translate into a five percent year-on-year, YoY, increase in Dangote Sugar’s revenue, saying, “The five percent rise in revenue will stem from an increase in the company’s selling price as Dangote Sugar will most likely transfer the rise in price of raw sugar to its consumers (the opposite occurred in 2013 where sugar prices declined and the company reduced its selling price to stay competitive).