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BUA Foods Surmounts Inflationary Environment as Earnings Surge

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BUA Foods Plc, one of the largest consumer goods firms in Africa’s most populous nation, has surmounted historically unprecedented inflation and supply chain issues as fourth quarter earnings surged, beating analysts’ expectations for most metrics.

The company posted revenue of N417.81 billion in December 2022, which is 25.31 percent higher than 2021’s N333.27 billion.

A breakdown of top line (sales) figures shows that revenue from sugar (non-forfeited) spiked by 82.30 percent to N144.29 billion as at December 2022 from N79.15 billion the previous year. Revenue from bakery flour was up 5.53 percent to N79.86 billion as at December 2021.

The company that was listed on the Nigerian Stock Exchange in January 2021 is making progress with the recommencement of the rice business to further diversify its revenue base.

Furthermore, it is making progress with the backward integration plans for the sugar business and its capacity expansion plans for flours, pasta, and divisions.

The company also expects optimising its supply value as it strives to increase market share across the market region.

BUA Foods utilises the capital of shareholders in generating higher profit as rewards them in the form of share appreciation and dividend payments.

Return on average equity (ROE) increased to 40.55 percent in December 2022 from 33.64 percent as at December 2021.

Net profit was up 29.57 percent to N90.40 billion in the period under review from N69.76 billion the previous year.

Operating income spiked by 36.12 percent to N108.75 billion in the period under review from N79.89 billion the previous year.

Gross profit followed the same growth trajectory as it was up 31.61 percent to N135.50 billion in December 2022 N102.95 billion as at December 2021.

BUA Foods and peer rivals are faced with severe challenges due to high exposure to foreign currency risk, stiff competition from unlisted brands with cheaper products, and limited ability in raising prices given the elastic demand of products.

While Nigeria’s inflation rate surprisingly eased to 21.34 percent in December 2022 from 21.47 percent recorded in November, it is still the highest in 17 years.

Manufacturers are complaining that the government has not been able to formulate policies that will unlock the potentials in a sector that is always the hardest hit from macroeconomic headwinds.

A lot of companies have been forced to lay-off staff to stay afloat as energy crisis and foreign exchange liquidity constraints while some have closed shops in a country where unemployment rate is high and the geopolitical tensions have tipped more Nigerians into the pit of poverty.

According to the latest national accounts, manufacturing sector growth contracted to -1.9 percent year on year (y/y) in the third quarter (Q3) ’22 compared with a growth rate of 3.0  percent year on year (y/y) recorded in the second quarter (Q2) ’22.

The food, beverages, and tobacco segment contracted by -4.1% y/y while the apparel, and footwear segment contracted by -3.9% y/y respectively in Q3 ’22.

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