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Consumers Buy Dangote Sugar, Nigeria Breweries Products at Faster Rate Than Rivals

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Dangote Sugar Plc, Nigeria Breweries (NB) Plc, and Nascon Allied Plc, are offloading their products to consumers at a faster rate than rivals, a signal of more efficient inventory management compared to peers in the consumer goods sector.

Analysis by MoneyCentral shows Dangote Sugar Plc, NB, and Nascon Allied have inventory turnover ratios of 6.21x, 6x and 5.45x, and it implies these three firms efficiently selling their inventory of goods. It also shows that they are not overspending on raw material purchases, storage and holding costs compared to competitors.

This compares with competition like Cadbury, 4.74x; International Breweries, 4.26x; Honeywell, 4x; Nestle, 3.95x; Unilever, 3.83x; Flour Mills, 3.30x; Vitafom, 2.75x; Guinness, 2.16x; and PZ Cussons, 0.90x.

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.

For Dangote Sugar, this means the firm is able to sell off its inventory of products on average every 58 days, Nigerian Breweries needs to replenish its inventory every 61 days and for Nascon it takes an average of 67 days.

On the other end of the spectrum, Flour Mills turns around its inventory on average every 110 days in a fiscal year, and for Guinness its 169 days.

It must be noted that eight of the twelve companies under our coverage outperformed the industry benchmark of 3.96x.

Companies from retailers to manufacturers held greater levels of inventory last year as global supply chain snarls forced a shift from a just-in-time mentality to a just-in-case one, according to EmergeVest, a Hong Kong-headquartered global investment firm that specializes in logistics.

EmergeVest Chief Executive Officer Heath Zarin said there were massive disruptions to container shipments across the world from the port of Shanghai last year, the center of multi-week lockdowns to stamp out Covid-19 infections in 2022.

Most Nigerian manufacturers import their raw materials from overseas in places like China.

It is impressive that companies are able to manage their inventories amid rising inflation, deteriorating consumer spending, and decrepit infrastructure and other stumbling blocks to growth.

February’s headline inflation increased by 9bps (when compared with the previous month) to 21.91% year on year.

The combined sales of the largest consumer goods firms spiked by 30.91 percent to N3.40 trillion as at December 2022, according to data gathered by MoneyCentral.

Analysts attribute the uptick at the top line (revenue) to an upward review in the price of key products by firms who were forced to carry out such a policy with a view to passing on rising input cost to consumers.

Total value of inventories and raw materials of these firms stood at N718.13 billion as at December 2022, which is 17.58 percent higher than 2021’s N610.75 billion.

Analysts say that rising inventories are as result of stock piling raw materials to avoid shutdowns in case there are post elections problems and to avoid impact of probable devaluation of Naira or inability to access foreign exchange.

The inventory turnover ratio can help businesses make better decisions on pricing, manufacturing, marketing, and purchasing. It is one of the efficiency ratios measuring how effectively a company uses its assets.

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