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BUA Foods Plc has a N212.87 billion working Capital edge over its competition, as the consumer goods giant effectively manages its inventory and payment days, which paves the way for the company to easily liquidate cashable assets to repay debt obligations.
With the high interest rates and economic uncertainties and a solid liquidity position, BUA Foods tight inventory and payments system means more efficient use of available cash.
There has been a deterioration in the cash conversion circle of most manufacturing companies brought on by soaring consumer prices, geopolitical tension, and foreign exchange volatility. This means that they don’t have enough liquid resources to meet their day to day operations.
Companies’ working-capital demands depend on a slew of factors, including how many days’ or months’ worth of inventory they hold, whether they pay suppliers after 30, 60 or 90 days, and when they receive payments from customers.
Working capital, also known as net working capital (NWC), is the amount of money a company has available to operate after deducting its current liabilities from its current assets.
It indicates a company’s ability to meet its short-term obligations and fund its day-to-day operations. Essentially, it’s the capital available to cover immediate expenses and manage the business effectively.
BUA Foods has N212 billion worth of Working Capital, Lafarge Africa has N17.23 billion; Fidson Healthcare, N54.53 billion; May and Baker, N19.20 billion; Nascon Allied, N44.26 billion; Unilever Nigeria, N72.98 billion;
Those who are exposed to liquidity crisis are Nigerian Breweries with a negative working capital -N149.23 billion; Nestle Nigeria -N26.92 billion; Cadbury, -N23.26 billion; Dangote Cement, -N265.30 billion.
BUA Foods optimizes its inventory level and has improved its operations better than peer rivals in the manufacturing sector, which validates strong sales growth and robust earnings.
BUA Foods has Days Inventory Outstanding (DIO) of 154 days, according to MoneyCentral calculations.
That compares to Cadbury, 338 days; Dangote Sugar, 306.25 days; Guinness, 300 days; International Breweries, 336 days; Nestle Nigeria, 370 days; Nigerian Breweries, 306 days; Unilever Nigeria, 364 days, and Nascon Allied, 237 days.
Days Inventory Outstanding (DIO) measures the average number of days it takes for a company to sell its entire inventory during a specific period.
A high DIO calculation indicates excess inventory while a low DIO suggests effective inventory management. By tracking and managing DIO effectively, you can make informed decisions to enhance cash flow and reduce storage costs. Your business can also optimize inventory levels and improve order fulfillment.
Cement makers are not selling their products at a fast pace, which is increasingly worrisome as the sales growth is meretricious given it is driven by an increase in the price of key products to help mitigate the effects of rising input costs.
It takes Dangote Cement about 601 days on average to sell all of its products for a given period and Lafarge Africa, 301 days.
Fidson and May and Baker have DIO of 405 days and 406 days respectively.
A weak consumer purchasing power indicates that there are goods unsold in the warehouse and the rising sales are due to a hike in the price of key products.
While Nigeria’s inflation rate has eased to 22.97 percent in May 2025, it is still above a single digit figure that will underpin economic growth.
Nigeria’s economic woes were compounded with the removal of subsidy on fuel and the unification of the foreign exchange market to spur foreign investment.
In the last 3 years, BUA Foods has been magnifying earnings and margins faster than its peer rivals in the consumer goods space as it was able to hedge against foreign exchange volatility that made it impervious to foreign exchange revaluation losses that tipped peer rivals over the edge.
Of course a diversified product base and excellent distribution and marketing strategy helped add impetus to earnings, making BUA Foods a stock to own.
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