Kimberly-Clark, a leading manufacturer of diapers and sanitary pads, is set to announce the imminent shutdown of its Ikorodu production facility in Nigeria, just two years after investing $100 million in the country, sources told Nairametrics.
The facility, which began operations in 2022, has been operating below capacity since late 2023 due to Nigeria’s harsh economic environment. Kimberly-Clark had initially restarted its Nigerian operations in 2021 after a similar shutdown in 2019.
The company, known for its Huggies diapers and Kotex sanitary pads, has faced significant challenges since late 2022, including high energy costs, expensive raw materials, and reduced customer demand. These issues have led to downsizing and a reduction in production days, with the plant now operating only from Monday to Thursday. Monthly operational costs have soared to over N500 million, with N100 million spent on power generation alone.
“Our first two years saw fantastic sales growth and market share gains in the diaper industry,” a source within the company said. “However, 2022 and 2023 were particularly challenging due to the economic situation. Our monthly fixed costs exceed N500 million, with N100 million spent just on gas consumption. Last year, our assets didn’t run for about 90 days out of the year.”
The company has also reduced its shifts from four to two, operating only five days a week, and has imposed an embargo on external recruitment as it seeks to cut costs amid non-profitable operations.
The high production costs are largely due to increased raw material expenses, which are import-based. Kimberly-Clark had set aside funds for operations with an expectation that Nigerian revenue would sustain them after five years.
The planned closure mirrors the struggles of other manufacturers in Nigeria, who have also exited due to high production costs, currency depreciation, and weak consumer purchasing power. Last year, Procter & Gamble (P&G) closed its production facility in Ibadan, having invested $300 million. PZ Cussons recently announced it is evaluating strategic options for its Africa business, considering asset disposals in Nigeria due to forex liquidity issues.
The Nigerian baby diaper industry, valued at $920 million with a projected CAGR of 11% from 2024 to 2028, is highly competitive, featuring leaders such as Pampers (P&G), Molfix, and Huggies (Kimberly-Clark).
The closure of Kimberly-Clark’s facility is a significant setback for Nigeria’s efforts to attract foreign direct investment and reflects the broader challenges faced by the real economy. If Kimberly-Clark transitions to an import-based model like GSK and P&G, it could further drive up the costs of diapers and sanitary materials amid Naira depreciation and increase the country’s import dependency at a time when local production is being heavily promoted.
