Huggies diaper and sanitary pad manufacturer, Kimberly-Clark, is poised to announce the shutdown of its Ikorodu production facility soon, despite investing $100 million in Nigeria two years ago.
Sources within the company revealed that the plant has been operating below capacity since late 2023, attributed to the challenging economic conditions in the country.
The company inaugurated a $100 million production facility in Ikorodu, Lagos state in 2022, intending to restart operations after a previous shutdown in 2019 following a strategic business review.
Kimberly-Clark commenced operations in Nigeria in 2012 but ceased due to adverse economic conditions after five years in 2019, only to resume in 2021.
The company manufactures Huggies diapers, sanitary pads, Kotex, and various other hygiene and personal care products.
KC is a listed multinational on the New York Stock Exchange, with institutional investors such as Blackrock Inc., Vanguard Group, Morgan Stanley, holding the majority of its shares.
An undisclosed source revealed that the company has been contending with soaring energy expenses, escalating raw material costs, and dwindling demand from customers since late 2022, worsened by the prevailing economic conditions.
Consequently, they have downsized operations and trimmed production schedules from seven days a week to only Mondays through Thursdays.
The company’s monthly expenditure on power generation has surged to approximately N100 million, excluding maintenance expenses. Additionally, its monthly fixed operational costs have ballooned to over N500 million.
He explained, “Our initial years saw remarkable sales growth and market dominance in the diaper industry. However, late 2022 and 2023 proved challenging due to the economic downturn.”
“Our operational costs have skyrocketed. We’re spending over N500 million monthly on fixed expenses, with an additional N100 million on gas consumption alone for power generation, excluding maintenance costs.
“Last year, our assets were inactive for approximately 90 days out of 365.
“Earlier this year, we had to reduce our shifts from 4 to 2 due to the economic constraints.
“Previously, we operated 24/7, but now we’ve halted production on Fridays, Saturdays, and Sundays. External recruitment has been halted as part of cost-saving measures, as the company is striving to navigate these challenging times without profitability.”
Additionally, the source highlighted that the inflated production costs are attributed to the rising expenses of raw materials, particularly since they are imported.
Upon commencing operations approximately three years ago, the company allocated funds for operations, estimating a five-year sustainability plan with revenue generated from Nigeria.
Another insider familiar with the situation informed Nairametrics that the company is unlikely to resort to imports, unlike its competitor Procter and Gamble, indicating it will not engage in official transactions within the country.
The impending shutdown of Kimberly-Clark’s operations in Nigeria echoes the experiences of other manufacturers who have exited the country in recent years.
Factors such as high production costs, currency depreciation impacting raw material imports, and weakened purchasing power among the populace have contributed to this decision.
Last year, another U.S.-based company in the personal care sector, Procter and Gamble (P&G), also ceased production in Nigeria under similar circumstances.
P&G had invested approximately $300 million, marking the largest non-oil investment by a U.S. company in Nigeria, in a production facility located in Ibadan.
PZ Cussons recently revealed plans to explore strategic options for its Africa business, particularly in Nigeria, its largest market, aiming to enhance shareholder value.
The company has resumed asset disposal initiatives in Nigeria after pausing them due to forex liquidity constraints.
The baby diaper industry in Nigeria boasts significant size, estimated at $920 million, with a projected compound annual growth rate (CAGR) of around 11% between 2024 and 2028, according to Statista.
Major players in this sector include Pampers by P&G, Molfix, and Kimberly-Clark’s Huggies. However, it’s a fiercely competitive landscape, with approximately 15 brands vying for market supremacy.
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