Meyer’s earnings wobble under cost pressure

High operational cost has continued to weigh on Meyer Paints Plc’s earnings


The paint industry in Nigeria has been facing a lot of challenging situations, which include high cost of raw materials due to importation of raw materials.


The combination of these factors has made many paint companies listed on the Nigerian Exchange Limited (NGX) face low consumer demand as their products are not considered as priority because of low disposable income.


Though raw material import with its attendant foreign exchange burden has remained a militating factor, it is not the only thing responsible for the less than sterling performance of paint manufacturers. Other challenges facing the industry include dearth of infrastructure, especially stable electricity supply, poor road network, multiple taxation and high import duties and tariff, among others.


For instance, even years after the privatisation of the power sector, manufacturers are yet to see any appreciable improvement in electricity supply, forcing them to rely heavily on in-house power supply at huge cost. Yet, power constitutes the single critical infrastructure to boost the manufacturing sector and create jobs. According to market watchers, these factors contribute to the high cost of production, which is said to be responsible for the high cost of goods produced locally compared to imported ones.


The cheaper price of imported goods is blamed for the penchant of Nigerians to patronise imported goods to the detriment of locally produced goods.


This is why many local industries, including paints manufacturers, that cannot stand the heat of the competition in the same market with imported goods are fast disappearing from the industrial landscape. Also, domestic constraints such as depletion of fiscal buffers, dwindling foreign reserves, among others, have remain hydra headed monster to the business operating environment.


Market watchers also believe that for paint industry to survive, more is needed to be done in order to totally curb the problem of counterfeiting. Individual companies must also be able to come up with technological innovations that will help counter the activities of counterfeiters. Meyer Paints Plc, like its peers, has continued to see fluctuation in profit in recent times.


The market sentiments for the shares of the company have also dropped, reflecting the general trend in value of shares quoted on the floor of the Nigerian stock market. Due to volatility in the economy, investors had remained hopeful on the back of expectation that the company’s innovative distribution strategies would boost revenue for the company. The company’s share price stood at 55 kobo at the close of trading last Friday.


Financials Meyer began 2020 financial year with a loss after tax of N24.991 million for the first quarter ended March 31, 2020 as against a loss of N292,000 reported in 2019.


Loss before tax stood at N24 million from equally a loss of N292.000 in 2019. Revenue dropped by 19.29 per cent from N327.629 million in 2019 to N264.405 million in 2020 while cost of sales grew by 21.46 per cent to N166.623 million from N212.156 million in 2019. For the second quarter ended June 2020, the group reported a loss after tax of N60.732 million from a loss of N29.581 million in 2019. Loss before tax stood at N59.255 million from loss of N27.314 million in 2019. Revenue declined by 34.82 per cent from N604.454 million to N393.964 million in 2020.


Cost of sales dropped by 35.37 per cent from N391.259 million to N252.860 million in 2020. Meyer recorded a loss after tax of N100.528 million for the nine months ended September 30, 2020 from a loss of N34.065 million in 2019. Loss before tax was N98.233 million from a loss N30.847 million in 2019. Revenue dropped by 33.99 per cent to N566.511 million in 2020 from N858.318 million in 2019 while cost of sales grew by 35.92 per cent to N360.414 million in Q3 2020 as against N562.514 million in 2019.


Following N1.781 billion profits realized from the disposal of the company’s building, the paint firm ended the 2020 financial year with a profit after tax of N1.118 billion from a loss after tax of N13.598 billion in 2019. The group’s profit before tax stood at N1.638 billion from a loss before tax of N7.176 billion in 2019. However, the group’s revenue declined by 25 per cent to N827.599 million in 2020 from N1.106 billion in 2019.


The paint firm returned to profitability during the first quarter ended March 31, 2021 with a profit after tax of N5.677 million as against a loss after tax of N24.988 million in 2020. Profit before tax stood at N8.110 million from a loss of N23.998 million in 2020. The group’s revenue dropped by 1.80 per cent to N223.473 million from N264.406 million in 2020 while    cost of sales stood at N145.155 million from N166.623 million a year earlier.


Hope by market watchers that the firm would sustain profitability was dashed as Meyer slipped into loss position with a loss after tax of N9.3326 million for the half year ended June 30, 2021 as against a loss after tax of N60.731 million in 2020. However, revenue for the period grew by 23,22 per cent to N485.461 million from n393.965 million in 2020.


Cost of sales stood at N331.462 million in 2021 from N252.860 million recorded the previous year representing a growth of 31.08 per cent. Meyer Paints reverted to profitability during the nine months ended September 30, 2021, as the profit after tax stood at N9.474 million as against a loss after tax of N100.528 million posted in 2020.


Profit before tax was N13.534 million from a loss before tax of N98.404 million recorded the corresponding period of 2020. Revenue grew by 34 per cent to N759.157 million in 2021 as against N566.511 million posted in 2020. But cost of sales rose by 40 per cent to N504.702 million in 2021 from N360.414 million in 2020.


However, hope that the firm would sustain the profitability seems a mirage as the high cost of operational cost led the profit after tax for the period ended December 2021 declined by 64.38 per cent to N39.816 million from N1.118 billion in 2020. Profit before tax equally dropped by 64.25 per cent from N1.638 billion to N58.553 billion in 2021.


Revenue grew by 35.08 per cent to N1.118 billion from N827.559 million in 2020 while cost of sales rose by 54.71 per cent to N725.733 million from N469.085 million in 2020.

The paint firm began the 2022 financial year on the low end to record 15.14 per cent decline in profit after tax to N4.817 million for the first quarter ended March 31, 2022 as against N5.677 million recorded in 2021. Profit before tax dropped by 11.99 per cent to N7.137 million in 2022 from N8.110 million in 2021. However revenue grew by 52.95 per cent from N223.473 million in 2021 to N341.804 million in 2022.


Cost  of sales grew by N73.66 per cent to N252.075 million from N145.155 million in 2021. Challenges Speaking at one of the annual general meetings, the Chairman of the company, Mr. Kayode Falowo, said that the year was indeed a very tough one for the group as a business. “The year started on a bright note, leveraging the good performance of the previous year. By half-year, the business started to record a downturn that lingered till end of the year.

The challenges the business faced were both external and internal in nature and these significantly impacted our performance as a business. “We struggled to gather some momentum in the last two months of the year, but obviously, that was not good enough to bring about the desired change in the fortune of the business.

“The forex impact in terms of availability, accessibility and exchange rate was huge and significantly affected our business, as almost 90 per cent of our raw materials are imported. This further weakened our working capital base and management had to devise some ingenious ways to stay afloat. You will recall that several manufacturing companies stopped doing business in the heat of the crisis.


We, however, managed to keep the factory opened, although our capacity utilisation dropped significantly,” he said. Forward looking Falowo, on the future horizon of the company, said the future for Meyer was very bright despite the current challenges faced by the business. “We are reinventing and repositioning our business to become a major key player in the paints business in Nigeria. “We have plans to deploy our model of color pavilions in key cities in the country to further make our products available to our numerous customers.



This will increase our footprints across Nigeria and bring our products closer to the customers. “In this 21st century, we realise that doing more will not be enough but being different holds the key to success.


“Hence, we are strategically positioned to revolutionise the paint industry through novel initiatives and also our background of Sigma international and Dunlop extractions have positioned us as a Multi-Product Company that offers world class quality and services,” he noted He noted that Meyer had expanded into complementary and allied areas of the paint industry.


He said: “Our recent heavy investment into the R & D of road lining Paints has made us the preferred local supplier of road lining paints with tremendous application capacity.” Last line The business climate for Meyer Paints Plc, like any other building material company, has remained challenging due to intense competition and hash operating environment.




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