Kimberly-Clark will soon shut down its Ikorodu production facility due to economic challenges despite a $100 million investment two years ago.
Sources revealed that the plant has been producing below capacity from late 2023 into 2024 due to the harsh economic environment within the country, according to Nairametrics,
Nevertheless, Kimberly-Clark made a successful comeback in 2022 with the unveiling of a cutting-edge $100 million production facility in Ikorodu, Lagos state.
The company’s product portfolio in Nigeria includes Huggies diapers, Kotex sanitary pads, and other hygiene and personal care products.
A source who claimed anonymity told Nairametrics that the company since late 2022 has battled with high energy costs, raw materials, and reduced demand from customers due to the prevailing economic situation.
As a result, this has led to downsizing and reduced production time from every day of the week to just Mondays to Thursdays.
The company currently spends around N100 million on power generation monthly aside from maintenance costs and its monthly fixed spend on operations has risen over N500 million.
According to the source, “Our first two years were fantastic in terms of sales growth and market shares within the diaper industry. Fast forward into late 2022 and 2023 was (sic) really bad years for the coy due to economic situation.
“Running cost is extremely on the high side. Our fixed spent on a monthly basis is above N500 million and we spent about N100 million on just gas consumption for powering the gas engine aside maintenance. The company has two assets and for last year, these assets didn’t run for like 90 days in 365 days.
“Earlier this year, the company had to downsize to 2 shifts from 4 shifts. We run 24 hours and 7 days and 365 days before but currently (sic) we don’t run on Friday, Saturday, and Sunday anymore because of the economic situation. There is already an embargo on external recruitment. The company is looking for ways to reduce cost since it is not making a profit.”
The source also disclosed that the high production cost stems from the increased raw material cost since it is import-based.
When Kimberly-Clark commenced operations in Nigeria about three years ago, it allocated funds to sustain its activities for an estimated five-year period. The company anticipated that by the end of this period, revenue generated from its Nigerian operations would be sufficient to support its continued presence in the country.
However, according to a source with first-hand knowledge of the situation, the company is unlikely to resort to importing products, unlike its competitor Procter and Gamble.
This suggests that Kimberly-Clark will not be engaging in official transactions in Nigeria.
The planned closure of Kimberly-Clark’s operations in Nigeria is reminiscent of the exit of other manufacturers from the country in recent years.
The closure of operations by Kimberly-Clark means that two of the three leaders in the diaper and personal care industry in Nigeria (P&G and Kimberly-Clark) have ended production in the last one year.