The renowned manufacturer of Huggies diapers and Kotex sanitary pads, Kimberly-Clark is set to announce the imminent shutdown of its production facility in Ikorodu, Lagos State.
This move comes just two years after the company invested $100 million to restart operations in Nigeria.
The decision to close the plant follows a period of suboptimal production, beginning in late 2023 and continuing into 2024. The company attributes the underperformance to Nigeria’s challenging economic environment.
Kimberly-Clark initially began operations in Nigeria in 2012 but halted them in 2017 due to unfavorable economic conditions. The company made a comeback in 2021, inaugurating a $100 million facility in Ikorodu in 2022. However, high energy costs, expensive raw materials, and diminished customer demand have significantly hampered operations since late 2022.
An anonymous source within the company revealed that the plant has been struggling with high operational costs, spending around N100 million monthly on power generation alone.
The overall monthly fixed costs have surged to over N500 million. Consequently, the company reduced its production schedule from seven days a week to just four days, operating only from Monday to Thursday.
“Our first two years saw fantastic sales growth and market share within the diaper industry,” Nairametrics stated
“However, late 2022 and 2023 were very challenging due to the economic situation. Our running costs are extremely high, with fixed monthly expenses exceeding N500 million. We spend about N100 million on gas consumption for power, and last year, our assets were idle for approximately 90 days out of 365.”
The company has also implemented cost-cutting measures, including downsizing from four shifts to two and imposing an embargo on external recruitment. The high production costs are primarily due to the increased cost of imported raw materials.
Kimberly-Clark’s struggles reflect broader trends in Nigeria’s manufacturing sector. In recent years, other multinational companies have faced similar challenges. Last year, Procter & Gamble (P&G) closed its $300 million production facility in Ibadan, and PZ Cussons has been evaluating strategic options for its Africa business, including asset disposal in Nigeria due to forex liquidity issues.
The Nigerian baby diaper industry, valued at $920 million with an expected compound annual growth rate of 11% between 2024 and 2028, is highly competitive. Despite the presence of major players like Pampers, Molfix, and Huggies (Kimberly-Clark), the economic environment remains tough for manufacturers.
The impending closure of Kimberly-Clark’s facility is a significant blow to Nigeria’s efforts to attract foreign direct investment and underscores the persistent challenges faced by the manufacturing sector.
If Kimberly-Clark follows P&G in transitioning to an import-based business model, the cost of diapers and sanitary products could rise further, increasing the country’s import bill amid a drive for local production.
