Nigerian conglomerate Chellarams, owner of the Oldenburger dairy brand in Nigeria, has announced a poor set of results, with revenue and profit both significantly down on 2017.
Chellarams PLC has announced a dismal set of results for the 2018 financial year. The key highlights are:
- Revenue down by 29.6% from N12.4bn ($34.7m) in 2017 to N8.73bn ($24.4m) in 2018.
- Profit before tax down by % from N567.7m ($1.59m) in 2017 to 269.9m ($0.76m) in 2018.
- Net profit down by 39.9% from N334.1m (0.94m) in 2017 to N200.7m ($0.56m) in 2018.
Chellarams’ FMCG and bulk milk ingredients business fell by 40% year on year from N4.5bn ($12.6m) in 2017 to N2.7bn ($7.6m) in 2018. Within this, the FMCG business suffered a decline of 65% from N3.8bn ($10.6m) in 2017 to N1.3bn ($3.6m) in 2018. This business includes the Oldenburger, Regal and Real milk brands, as well as the Real Active malted food drink brand. The declines come after the company announced profits from its FMCG business were down 33% from FY2016 to FY2017.
Chellarams’ management have put the decline down to the impact of rising costs of imported raw materials, high administrative costs, and stiff competition in the dairy sector. This does not tell the full picture.
Certainly, the weak Naira has hit FMCG companies reliant on imported materials hard. We have seen repeatedly in company results in Nigeria, as brewers and large FMCG companies have stressed the effect of rising costs on profits. However, nearly all of those same companies – Nestlé, Unilever, Cadbury, Champion Breweries, Diageo are reporting surging growth in the underlying business. Chellarams, which last year formed a strategic partnership with German dairy company DMK Group, has more systemic issues. At a time when consumer confidence is on the rebound in Nigeria it is seeing sales falling in a major way – indicating that market share is also in freefall.
In 2016, Danone became the majority shareholder in Fan Milk, one of Nigeria’s leading domestic dairy companies, while dairy giants Arla and FrieslandCampina have also made significant investments in Nigeria. Meanwhile market leader Promaisidor, owner of the Cowbell brand, saw Ajinomoto acquire a 33% stake at the end of 2016. Chellarams is clearly struggling to adapt to the competition and hasn’t innovated during a period when the dairy market has diversified in terms of products and consumer expectations are shifting. The declining sales in FMCG also appear to signal a change of strategy for Chellarams – with management focused on growing its industrial and energy business units.
