Investors task govt on business environment as FMN may pull N248b from exchange — Business — The Guardian Nigeria News – Nigeria and World News

Despite huge sector investment and enormous growth potential, given the compelling demographic configuration, which places Nigeria as one of the largest consumer markets in Sub-Saharan Africa, chances of survival for companies under the FMCG sector are currently slim going by the huge blow the harsh economy has dealt on their profit margin.

Investors yesterday renewed calls for the present administration to accelerate commitment to ease of doing business, address the general downturn in economic activities and tackle the impact of the nation’s struggling economy on manufacturing.

This call is coming as shareholders were greeted with the news that FMN Plc had received an offer from the majority shareholders, Excelsior Shipping Company Limited to acquire all the shares of minority in Flour Mills at an offer price of N70. This came two years after FMN Plc completed the acquisition of a 71.69 per cent stake in Honeywell Flour Mills Plc (HFMP).

As of 11:40 am yesterday, the stock had already gained 10 per cent to close at N60.50 kobo from N55 at which it opened for transaction. The investors believed that the company would tow the path of other listed firms with similar notification to subsequently delist from the nation’s bourse, also because it has received a ‘no objection’ ruling from the Nigerian Exchange Limited (NGX).

With FMN Plc’s market capitalisation of N248 billion, the shareholders bemoaned the increasing level of voluntary delisting of firms and consequent capital flight urging both regulators and government to identify factors fueling renewed delisting moves among listed firms and find a lasting solution to the trend.

Precisely, FMN Plc is currently the 29th most valuable stock on the NGX with a market capitalisation of N248 billion, which makes up about 0.436 per cent of the NGX equity market.

Indeed, the effect of naira devaluation, rising inflation and interest rate hikes has continued to take a huge toll on the performance of firms in the sector, causing their cost of operations to escalate.

Weak consumer spending has also constituted a drag to volume growth, even higher prices that were passed through to consumers could not make up for revenue as consumers are currently fighting back and are not willing to take more price increments.

There is currently a sustained shift towards essential purchases for the majority of Nigerian consumers which is impacting negatively the demand for FMCG products with the attendant effect on sales, revenues and profits, which portends a big threat to economic growth.

In 2023, 11 firms valued at N500 billion were delisted from the exchange. This has increased the number of firms that delisted since 2002 to 135 according to data from the exchange.

Aside from FMCG, six multinationals incurred losses of up to N540 billion last year without any period in sight on when to recover from these losses. Head of Research, Planet Capital, Dr Paul Uzum, said the tough economic conditions have continued to affect the sector, leading to rising finance costs, cost of doing business, contracting demand for products due to weak purchasing power of consumers, rising cost of transport of finished goods and Foreign Exchange (FX) losses due to the free fall of the naira. He pointed out that the company is delisting because they do not derive much benefit from being under public scrutiny.

“They will no longer have to impress any group of investors, or need shareholders’ approval to undertake critical investment decisions like mergers, takeovers, divestment or spinoffs. Finally, it is easier to minimise tax liability for an unlisted company.”

President of New Dimension Shareholders Association, Patrick Ajudua described the development as unfortunate, noting that the harsh operating environment is currently constituting a threat to the going concern of listed firms.

“As shareholders, we acknowledge the effect of devaluation of the naira, high cost of doing business and inflationary pressures on their business which has caused them to incur huge foreign exchange losses resulting in negative bottom line & inability to pay dividends.

“Government and regulators should do everything within their powers to ensure the survival of these companies that have been paying taxes, creating job opportunities and contributing to economic development.”

In addition, he urged the company to review the offer arrangement upward, considering the rising inflation that has eroded the value of the nation’s currency.

President of the Independent Shareholders Association of Nigeria, Moses Igbrude, said it is shocking to hear that FMN is taking the path of delisting from the exchange and buying off minority shareholders after many years these shareholders have laboured to grow the company.

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