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Friday, September 30, 2022

BUA Foods is Largest Consumer Firm by Profit, Net Margin

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BUA Foods Plc who was listed on the NGX ASI in January has beaten peer rival Nestle Nigeria to be the largest consumer goods firms by profit and net margin.

This means the management of the consumer goods giant makes enough profit from its sales while at the same time containing overhead and other costs even amid inflationary pressures, foreign exchange shortages, and supply chain bottlenecks.

For instance, BUA Foods posted net income that spiked by 99.41 percent to N75.17 billion as at December 2021.

That compares with Nestle Nigeria’s N75.17 billion; Dangote Sugar, 22.05 percent; Flour Mills of Nigeria N17.04 billion; Nigerian Breweries, N12.67 billion; Guinness, N8.82 billion; Vitafoam, N4.59 billion, Unilever, N3.47 billion; Nascon Allied, N2.97 billion; PZ Cussons, and N2.57 billion.

Further analysis of the books of the largest and most liquid firm on the NGX ASI shows BUA Foods’  has a net margin of 22.53 percent, according to MoneyCentral calculations.

And that compares with Vitafoam 12.98 percent; Nestle, N11.38 percent; Champions Brewery, 9.36 percent; Nascon Allied, 8.93 percent; Guinness, 8.08 percent; Dangote Sugar, 7.99 percent; PZ Cussons, 5.46 percent; Unilever, 4.93 percent, and Nigerian Breweries, 2.90 percent, and Flour Mills.

The net profit is a better measure of a company’s size, and it is a dependable strategy in stock selection; unlike the market capitalization that is susceptible to gyrations or swings.

It is worthy to note that investors who have not bought BUA Food’s stock will be missing out on a bumper dividend the consumer goods giant will be paying out of distributable profit to shareholders.

BUA Foods has a 1.5 million MTPA Combined Sugar Production Capacity, eight ultramodern factories for producing rice, sugar, pasta, flour and 20,000 hectares of arable land located in Lafiagi, Kwara State.

The consumer goods firm has 2 ultra-modern and automated sugar refineries (BUA Sugar Refinery, Lagos and Eastern Sugar Refinery, Port Harcourt) with a combined installed refining capacity of 1,500,000 metric tonnes.

“BUA is the only sugar refiner to have refining capabilities outside Lagos, Nigeria. In response to Nigeria’s backward integration policy in the Sugar Industry, BUA Group acquired the Lafiagi Sugar Company (LASUCO) in Kwara state in 2008 and established the Bassa Sugar Company in Kogi State,” said analysts at CSL Stock Broker in a note to clients.

BUA Foods is poised to create a more competitive arena as it has established a state-of-the art plant in Port Harcourt, to cater to the growing needs of fast-growing young population who crave for consumption.

The plant currently has 576,000 tons of flour milling capacity. Its closest competitors are Flour Mills of Nigeria, Honeywell Flour Mills, and Olam.

However, the company operates in a tough macroeconomic environment and the inability of the government to formulate transformational policies capable of spurring rapid economic growth has continued to hurt companies who are reeling from foreign exchange crisis while inflationary pressures and high utility bills have stolen the wages of workers.

The eight-month consecutive decline in headline and food inflation came to an abrupt end as the National Bureau of Statistics (NBS) reported headline inflation in December 2021 at 15.63 percent year on year  (yoy).This was 23bps higher than 15.40 percent yoy reported in November 2021, but 13bps behind 15.75 percent yoy in December 2020.

There is light at the end of the tunnel as the relaxation of the lockdown is expected to be a boon for consumer goods firms.

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