Industry players in Nigeria’s Fast Moving Consumer Goods (FMCG) sector have encouraged companies to up their game in corporate disclosure to enable them attract investments.
The need for firms in the FMCG industry to ensure full disclosure of their operations to the general public is due to the fact that there is increasing level of investors expectation, the industry stakeholders said.
“Public companies are more successful in raising private capital for the simple reason that a number of due diligence box has been ticked,” Olumide Bolumole, the NSE Divisional Head, Listing Business said at the 2nd Investor Relations conference held recently in Lagos.
Corporate disclosure refers to the act of releasing all relevant information on a company that may influence an investment decision—making public both positive and negative news, data, and other details about its operations, or that impact its operations, in a timely fashion.
All the quoted companies on NSE are required to comply with some rules and regulations, including strict adherence to high disclosure standards as prescribed in Appendix 111 of the NSE Listing Rules.
The sanctions for non-compliance with periodic financial disclosure obligations are clearly spelt out in the Rules for Filing of Accounts and Treatment of Default Filing, Rulebook of the Exchange. Under the rules, a late submission attracts a fine of N100, 000 daily for the first 90 calendar days of non-compliance, another N200,000 per day for the next 90 calendar days and a fine of N400,000 per day thereafter until the date of submission.
A Lagos-based analyst who asked not be quoted said it is usually challenging when trying to get detailed information from listed Nigerian FMCG companies talk less of the private ones.
“When some of them release their financials, to get a response to a simple question like- what were the drivers of your last year performance or what happened to pricing. Most basic questions like that won’t be answered, in fact you get more answers about the Nigerian subsidiary from their UK office than the office in Nigeria,” the analyst lamented.
According to Ladi Daodu, the CEO of Sierra Partners Limited, if the issue of disclosure and preparing of private businesses can be sorted, it will go a long way in defining how the investment market and the business landscape in Nigeria will be going forward.
“One of the key take away for me is that the players in the private space should be equally prepared in terms of what they are required to put in place to get listed and be able to get funding because one of the things that pose as challenge for them is accessing cheap capital,” Daodu told BusinessDay on the side-line of the 2nd investor relations conference hosted by Arrhenn Investor Relations Limited (“Arrhenn”), a financial services company.
At the end of the first quarter of 2019, the largest consumer goods firms made N419.14 billion, a 3.78 percent reduction from the N435 billion realized in the same period in 2018, as compiled from BusinessDay analysis of the firms’ financials.
Average net margins fell to 7.07 percent in the same period, a 9.17 percent decline compared to the previous year: meaning the companies are finding it difficult to turn each naira generated in sales into higher profit fuelled by harsh economic environment.
“In this edition of the investor relations conference we focused on FMCG industry, as investors are becoming more sensitive about information and as such we urge companies to take it seriously,” Abayomi Ogunjobi, CEO, Head, Investor Relations, Arrhenn said.
The main aim of corporate disclosure is to communicate firm performance and governance to outside investors. This communication is not only called for by shareholders and investors to analyse the relevance of their investments, but also by the other stakeholders, particularly for information about corporate social and environmental policies, BusinessDay findings revealed.
“I think that if companies understand the value of making disclosure, they will do that more often. In advance market, it is even at the interest of the company to disclose, else the market may penalise them,” Chimaobi Nwaokoma, Senior Manager, investor Relations Finance at MTN Nigeria said.