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Nigeria Consumer Goods Sector - Q3'20 Earnings

The first half of the year was a difficult one for many consumer goods companies. While some players were able to ride the wave of the storm and post decent performances this period, others succumbed to the demand deficit and consumers’ price sensitivity that rolled with the wave of economic disruption. We saw many companies embark on different survival strategies, ranging from cost cutting measures, online sales promotions and expansion into the value segment of the consumer space.

Looking across the sub-sectors, the food, sugar, and beverage companies were the most insulated as the gains in market share resulting from the stricter border controls told positively on Revenue. Furthermore, the inelasticity of most food products supported demand through the turbulent cycle. Lower down the gainers scale, the Home and Personal Care makers were set for a profitable season following increasing awareness for total and more frequent hygiene practices. However, on the flip side, Brewers had a sad story as demand and sales volume dropped significantly due to reduced social interaction. Players in the durable consumer goods space also faced challenges as most consumers’ income fell and likely deferred purchases in the segment.

After a depressed first half, Q3 saw a leap in stock price performances. We believe that this reflects investors’ positive expectations for Q3 earnings rounds as well as bargain hunting positioning as stocks sank to multi-year lows in the H1 period.