Uche
P&G to end manufacturing operations in Nigeria.
Procter & Gamble (P&G), the world’s largest consumer products corporation, announced Tuesday that it will cease manufacturing in Nigeria and focus only on imports.
Over the next two years, the multinational plans to incur $2.5 billion in charges from reorganising operations in some of its regions and writing down the value of its Gillette business.
The maker of iconic brands such as Pampers, Gillette, Ariel, Always, and Oral-B might face after-tax expenses ranging from $1 billion to $1.5 billion from reorganising its operations in Nigeria and Argentina, two regions where the company has struggled.
“So when you think about places like Nigeria, when you think about places like Argentina, it’s very difficult for us as a U.S. dollar-denominated company to create value,” Andre Schulten, the chief financial officer, said at Morgan Stanley Global Consumer & Retail Conference in New York.
“It’s also difficult to operate because of the macroeconomic environment,” he added.
The move adds to the woes of multinational operations in Nigeria, where foreign companies, particularly manufacturers and energy firms, have been leaving in droves, citing the current foreign exchange crunch and naira depreciation, which means lower earnings for foreign companies in dollar terms.
Unilever said in March that it would cease manufacture of its homecare and skin-cleansing products in the country because such categories are “margin dilutive” and the decision was required to make its Nigerian operation profitable.
GlaxoSmithKline, the British pharmaceutical giant, announced in August that it will similarly close its manufacturing activities in Nigeria, instead opting for a third-party distribution model.
For 30 years, P&G has operated in Africa’s greatest economy, with two manufacturing sites in Ibadan, Oyo State, and Agbara, Ogun State. In recent years, it has reduced its operations through employment losses and partial functioning of its factories.
“Only the P&G plant in Ibadan is currently being run by the company, and it only produces Ariel detergent. All the other P&IG products in Nigeria are either being imported or produced by another company licensed by P&IG,”
According to P&G’s CFO, Nigeria generates $50 million in net sales to the company’s global business.
“We think that we’re at the point in both markets, Argentina and Nigeria, where a change in the approach will yield a better result overall,” Mr Schulten said.
“So it’s not because it’s opportune. It’s because we truly believe this is the better way to go to market in those geographies.”
Davidd
