US consumer goods powerhouse Procter & Gamble (P&G) will discontinue manufacturing in Nigeria and pivot to import-only activity, the company has said.
The multinational expects $2.5 billion in charges over the next two years from rejigging operations in some of its markets and writing down the value of its Gillette business.
The maker of iconic brands including Pampers, Gillette, Ariel, Always and Oral-B could incur charges anywhere between $1 billion and $1.5 billion after-tax from restructuring its operations in Nigeria and Argentina, two markets where the business has been problematic for the corporation.
“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 especially manufacturers and energy firms have been exiting in droves, most citing the current foreign exchange crunch and devaluation of the naira, which means lower earnings for foreign companies in dollar terms.
In March, Unilever announced an end to the production of its homecare and skin-cleansing products in the country because those categories are “margin dilutive” and the decision needed to be taken to make its Nigerian operation profitable.
This August, British pharmaceutical giant GlaxoSmithKline said it was terminating its manufacturing operations in Nigeria also, opting instead for a third-party distribution model.
P&G has been operating in Africa’s largest economy for 30 years and ran two manufacturing plants in Ibadan, Oyo State and Agbara, Ogun State. It has been scaling back operations through job cuts and partial running of its factories in recent years.
“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,” a company source disclosed.
Nigeria contributes $50 million in net sales to P&G’s global business according to its CFO.
“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.”
