Auto industry gets three-year hit in profit, stocks

Cars

The nation’s automobile industry has been reeling under the pangs of harsh operating environment, just as the bottom-line of the sector’s listed equities, since 2015, remained subdued, with gloomy outlook, due to policy challenges.
 

Indeed, most hit, within the period, were the share prices of these companies on the trading floor of the Nigerian Stock Exchange (NSE), which have remained stagnated at nominal value year-to-date, following negative sentiments that have enveloped the demand for the stocks.
 

Due to the depreciating value of the Naira, only fewer people are able to buy new vehicles, while the fairly used vehicles, popularly called “Tokunbo”, have to a large extent remained unaffordable to average Nigerian, as lull in sales records showed the effect of the nation’s economic situation and government’s policy inertia.

 
According to reports, the price of new vehicles has exponentially risen, leaving many people below that the line of affordability, as the economy brands of the cars, which go between N2 million and N3 million are now between N10 million and N15 million. 
 
The small and medium sector operators have also been squeezed by the poor economy, as they now go for the fairly used vehicles that are less seemingly less expensive, causing Nigeria’s auto industry, unlike its counterparts in other countries, to face challenges that retard its growth potentials.
 

Some of these impediments include disparity in tariffs, external competition, high production costs, smuggling, inaccessibility of finance, absence of functional industrial clusters for production of automobile and lack of modern technology.
   

Despite the fact that at the global level, the automobile industry has shaken off the effects of the global financial crisis, Nigeria has continued to pose policy and infrastructure issues, which churn out, on consistent basis, tough operating environment.
 
For instance, from a nominal share price value of 50 kobo per share in October 2017, to 38 kobo as at close of trading on Friday, a pioneer-status automobile industry, RT Briscoe, has continued to battle with lower sales and declining bottom-line, as it posted a loss after tax of N809.983 million for the month ended  March  31, 2018, from a loss of 478.293 million in 2017.
   
The auto company began the year 2018, with a loss after tax of N809.983 million for the month ended March 31, from a loss of N478.293 million in 2017, with cost of sales standing at N609.743 million, from N714.121 million a year earlier.
 
While administrative expenses was N244.663 million in contrast to N394.813 million posted in 2017.

The company’s revenue dropped by 27.25 per cent to N894,107 million from N1.229 billion posted in 2017.

Specifically, the company sustained loss position as it posted a loss after tax of N1.530 billion for the half year ended June 30, 2018, against loss after tax of N1.156 billion posted a year earlier, as the group’s revenue declined by 12.34 per cent from N2.706 billion in 2017, to N2.372 billion posted in 2018.