Nestle Nigeria Plc, BUA Foods Plc, and Cadbury Nigeria Plc, are able to compound machines and continually reinvest their earnings back into the business and generate higher returns than peer rivals.
Also, this means that these firms are generating higher returns from the same amount of capital and that is proof that there are improvements in the companies’ efficiencies
For instance, Nestle Nigeria, BUA Foods, Cadbury generated return on capital employed (ROCE) 0f 11.90 percent, 11.10 percent, and 10.90 percent respectively, according to MoneyCentral calculations.
And that compares with Guinness Nigeria, 9.50 percent; Flour Mills of Nigeria, 9.40 percent; Nascon Allied, 4.60 percent; Dangote Sugar, 4.10 percent; PZ Cussons, 3.70 percent; Nigerian Breweries, 0.40 percent, and International Breweries, -1.10.
Generally, a higher ROCE suggests successful growth of a company and is a sign of higher earnings per share in the future.
The impressive performance of these firms have been rewarded by investors as their shares have gained since the start of the year even amid investor apathy for the equity market due to recession fears, opacity of foreign exchange policy, fiscal cliff, and insecurity.
BUA Foods with a year to date (YTD) of 75.38 percent that outperformed the broader market is one of the top 10 performers on the NGXASI index.
Cadbury, has a YTD of 15.13 percent while Nestle has lost -5.11 percent so far this year, underperforming the broader market.
All in all, consumer goods firms capitulated to a challenging environment as currency devaluations, rising borrowing costs, red-hot inflation, and foreign exchange illiquidity undermined profit margins.
The combined net income of the largest firms reduced by 13.64 percent to N7.86 billion in March 2023 from N9.11 billion as at March 2022, according to data gathered by MoneyCentral,
The average net profit margin fell to 9.21 percent in the period under review from 10.01 percent as at March 2022, according to MoneyCentral calculations.
However, BUA Foods, Nascon Allied Industries, Dangote Sugar, and Cadbury bucked the trend as they recorded expansion in profit and margins that signals they have surmounted the macroeconomic headwinds.