BUA Foods Uses Inventory to Generate Higher Sales Than Peers

BUA Food Plc has turned over its inventory at a higher speed to sales compared to peer rivals amid weak consumer discretionary spending and a challenging environment.

Since its debut listing on the stock exchange a few years ago, BUA Food has remained resiliently impervious to macroeconomic headwinds, and that makes it a must own stock.

BUA Foods turned over its inventory 46 days on average during the year ended December 2023, according to MoneyCentral calculations.

That compares with Dangote Sugar’s 47 days; International Breweries, 62 days; Cadbury, 71 days; Unilever, 79 days; Nascon Allied, 97 days; Flour Mills of Nigeria, 105 days; Nigerian Breweries, 115 days, and Guinness Nigeria, 125 days.

Inventory turnover is a financial ratio showing how many times a company turned over its inventory relative to its cost of goods sold (COGS) in a given period. A company can then divide the days in the period, typically a fiscal year, by the inventory turnover ratio to calculate how many days it takes, on average, to sell its inventory.

Carrying too much inventory is a problem for many consumer goods firms because it drives up their expenses for handling, storing and transporting products.

Inventory gluts squeezed many firms’ gross margins as shoppers slowed down on discretionary items due to red-hot inflation.

BUA Foods’ sales or revenue were up 74.15 percent as at December 2023.

That compares with Unilever’s sales growth of 50.25 percent; Cadbury, 45.58 percent; Four Mills of Nigeria, 39.97 percent; Nestle Nigeria, 22.45 percent; International Breweries, 20.87 percent; Guinness Nigeria, 20.85 percent; Dangote Sugar, 9.47 percent, and Nigerian Breweries, 8.90 percent.

“Reflecting the broader macroeconomic terrain of the nation, the consumer goods sector has grappled with a host of pervasive challenges,” said analysts at Meristem Securities Limited.

“These challenges range from foreign exchange shortages and the Naira devaluation, lower purchasing power of consumers due to the unabated inflationary pressures, the rising cost of commodities, amongst others,” said the analysts.

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