Top multinationals make sharp rebound to post record profitsBut the second wave may squash demand and push the economy back into uncertainty, insiders say.
Major multinational companies operating in Nepal have made a sharp rebound from a disastrous showing in the last fiscal year, and posted all-time high net profits in the third quarter ended mid-April.
But industry insiders say the second wave of Covid-19 may squash demand and push the economy back into uncertainty as the country flounders amid soaring new infections.
The resurgence of Covid-19 started in early April, spread mostly by infected travellers from India who were able to slip into the country due to lax security at the border, experts said. The second wave brought the more contagious UK strain, and a spike in new infections prompted the government to slap a second lockdown on April 29.
Among the multinationals, Nepal's largest fast-moving consumer goods (FMCG) maker Unilever Nepal reported a 521 percent year-on-year jump in profit to Rs321.6 million in the third quarter of this fiscal year 2020-21, according to the company’s financial statement.
Unilever Nepal attributed the growth in profit to higher sales. The maker of Lifebuoy soap and Pepsodent toothpaste had posted a net loss of Rs76.3 million in the third quarter in the last fiscal year 2019-20 due to Covid-19 related restrictions.
Before that, in the third quarter of 2018-19, the company's profit stood at Rs273.6 million.
“Demand for the company's products continues to remain strong as 80 percent of the portfolio is Covid relevant. While the company has delivered strong performance in the third quarter driven by strong execution catering to sustained demand, the recent surge in cases poses a significant challenge,” the company said in its report filed with the Nepal Stock Exchange.
Another multinational Bottlers Nepal that produces Coke, Fanta and Sprite reported a net profit of Rs294.62 million in the third quarter. The profit is a result of swelling sales and cost saving initiatives, the company said.
Bottlers Nepal had posted a net loss of Rs18.03 million in the third quarter of the last fiscal year, while it had made a net profit of Rs276.33 million in the third quarter of 2018-19.
The company said it could face distribution challenges in rural areas at effective cost, and fluctuations in foreign exchange could impact the material cost.
“The company will proactively monitor internal and external environment changes, and develop cost-effective distribution models for upcountry areas,” said Pradip Pandey, managing director of Bottlers Nepal, in the financial statement.
Its subsidiary Bottlers Nepal Tarai reported a net profit of Rs371.42 million in the third quarter of 2020-21, compared to a net profit of Rs32.63 million in the same period in the last fiscal year, mainly driven by an increment in sales volume and cost-saving initiatives.
The company said its revenue from operations increased to Rs4.52 billion in the third quarter, up from Rs3.87 billion in the same period in the last fiscal year. The company’s net profit in the third quarter of 2018-19 was Rs193.61 million.
According to the third quarter report of Dabur India for the fiscal year 2020-21, its Nepal business grew by 12.9 percent.
The multinational companies the Post talked to said they were facing difficulties in production due to the pandemic and uncertainty over the severity of the second wave of the novel coronavirus. They said the safety protocols enforced by the government were harsh.
Despite the high demand for fast-moving consumer goods amid the pandemic, manufacturers said sales could drop significantly in the fourth quarter due to the impact of the lockdown on production and restrictions on the supply chain.