BUA Foods to See 2026 Margin Expansion as Volume Growth Meets Falling Input Costs

The outlook for BUA Foods Plc in 2026 is increasingly bullish as the company pivots from a period of heavy capital expenditure toward a “harvest phase” characterized by massive throughput and margin recovery.

As the largest consumer goods stock by market capitalization, BUA Foods is uniquely positioned to benefit from a dual tailwind: the operationalization of new production lines and a cooling global commodity market.

“We have revised Full Year (FY) 2025 revenue estimate to N1.9 trillion (vs N1.8 trillion previously) to reflect price increases and higher volumes in the Sugar (+5.0%) year-on-year (YoY), Flour (+26.0% YoY), Pasta (+4.0% YoY), and Rice (+50.8x YoY) product lines as of 9M’2025. We expect the fourth quarter (Q4) 2025 volumes to be relatively higher than prior quarters, reflecting festive-induced demand,” Cardinal Stone Partners analysts said in a December 22 note to clients.

BUA Foods Plc in 9M’25 continued its positive momentum, reporting a 101.2% YoY growth in profit after tax (PAT) to N405.3 billion.

The earnings growth stems from a strong topline performance (+32.7% YoY) of N1.4 trillion.

Furthermore, the almost complete elimination of foreign exchange loses (-99.8% YoY) and the material decline in net finance costs following the deleveraging efforts of the company during the review period strengthen the positive outlook on the company.

For Full Year 2026, Cardinal Stone Partners see room for a continued revenue uptick (+20.8% YoY to N2.3 trillion), aided by improving macroeconomic conditions, which is positive for customers’ purchasing power.

Additionally, they expect ongoing capacity expansions, improving utilisation rates, and deepening market penetration (particularly in the rice segment) to support volume growth further and, by extension, topline.

On the cost front, the analysts expect Cost of Goods Sold (COGS) growth to moderate in FY’25E, supported by lower raw sugar (-21.6% YtD) and wheat (-3.1% YtD) prices, coupled with the appreciation of the local currency.

Consequently, they forecast COGS to grow by 22.9% YoY to N1.2 trillion, implying a gross margin of 37.0.

Wheat and raw sugar prices on the global market (CBOT) are trending downward as global harvests for the 2025/2026 season hit record highs.

Wheat prices are projected to remain soft in2026 amid sustained high output from major exporting regions, including the EU, Russia, and the Americas, with the World Bank forecasting record wheat production in the 2025/26 crop year.

Similarly, the International Sugar Organisation projects a global sugar surplus of 1.625 million metric tons, which should keep prices subdued.

On the FX side, the Central Bank of Nigeria (CBN’s) market reforms and move toward market-reflective rates have reduced the volatility of letters of credit (LCs) for raw material imports.

For Full Year FY 2026, Cardinal Stone expect BUA Foods finance costs to moderate materially, reflecting the deleveraging done in 2024 and the absence of additional borrowings.

“As such, we see potential for the interest coverage ratio to strengthen to 42.7x in FY’25E and 65.2x in FY’26E. This translates to an expansion in PBT margin to 30.8% in FY’25E and 31.5% in FY’26E (vs. 18.6% in FY’24). Furthermore, given the positive outlook for the currency, we do not foresee any FX losses in the coming year,” the analysts said.

Dividend payments

BUA Foods has remained consistent in its dividend policy over the past four years, paying out an average of 88.8% of earnings as dividends to shareholders.

In FY 2023 and FY 2024, the company declared dividends of N5.50 and N13.00, respectively, driven by an average growth in Earnings Per Share (EPS) of 80.0% across both years.

For FY’25 and FY’26, Cardinal Stone maintain a positive outlook, with forecast Dividend Per Share (DPS) of N27.09 and N33.56, respectively.

This outlook is supported by robust profit-after-tax growth, solid operating cash-flow generation, and the maintenance of a high dividend payout ratio of 88.0%.

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