In the first week of January 2022 BUA Foods Plc listed on the main board of the Nigerian Exchange Limited (NGX) to become one of the most capitalised firms in the country, today it is converting sales into actual profit more than peer rivals in the consumer goods industry.
Interestingly, the company has the strongest or highest net margin among consumer goods firms even amid a challenging macroeconomic environment.
BUA Foods has a net margin of 21 percent as at September 2022, and that compares with Nestle Nigeria Plc, (12 percent); Dangote Sugar, (7 percent); Unilever Nigeria Plc, (6 percent); Dangote Sugar, (7 percent); Cadbury Nigeria Plc, (6 percent); Nigerian Breweries, (7 percent); Flour Mills, (3 percent), and UACN, (2 percent).
Investors who prefer to put their money in businesses that reap profits on a regular basis look up to the net margin in taking informed investment decisions such as stock picking and gauging the overall profitability of a business. In short, the ratio is essential in rewarding shareholders.
Like a submarine, an inconspicuous weapon of mass destruction, BUA Foods has taken the industry by surprise as it has been recording double digit growth in earnings since it went public.
The consumer goods giant produces Sugar, Pasta, and Flour as it also cultivates rice, which validates a diversified product base that adds impetus to earnings.
As a leading producer of fortified and non-fortified sugar in West Africa, it also operates the second-largest sugar refinery in West Africa, with a total refining capacity of 1.5mn MTpa.
It is noteworthy that BUA Foods owns a flour milling plant with a capacity of 500,000 MTpa; operating at 84 percent capacity while it owns pasta plant with current capacity of 250,000 MTpa; operating at 54% capacity;the company owns 200,000 MT per annum rice milling plant.
BUA Foods and its peer rivals are going to face price pressures this year, as the sugar industry (both locally and internationally) has been faced with the challenges of high prices of raw sugar, and that is in addition to rising inflation and decrepit infrastructure.
Nigeria relies heavily on the importation of raw sugar with 98 percent of locally utilized raw sugar imported.
But the good thing is that BUA Foods has the financial strength that makes it impervious to headwinds as it has a strong balance sheet and its cash flows are giving it more opportunities.
The company saw net income or profit after tax (PAT) spike by 65.23 percent to N30.04 billion as at September 2022 from N18.18 billion the previous year.
Revenue was up 39.24 percent to N120.46 billion in September 2022 from N86.50 billion as at September 2021.