BUA Foods has become the second largest consumer goods firm by market capitalization immediately after listing its shares on the Main Board of The Nigerian Exchange (“NGX”) by parent company BUA Group.
BUA Foods, a combination of its five food businesses comprising pasta, edible oil, sugar, rice, and flour admitted 18 billion ordinary shares at an introductory price of N40, which translates to a market capitalization of N720 billion.
While Nestle Nigeria has a larger market cap of N1.23 trillion, BUA Foods market value is much bigger than Nigerian Breweries, (N383.85 billion); Dangote Sugar, (N206.49 billion); International Breweries, (N132.96 billion); Flour Mills, (N118.91 billion); Guinness, (N85.42 billion); Unilever, (N83.30 billion); Nascon Allied, (N34.97 billion), and Vitafoam, (N25.33 billion).
“The market should be happy about the new listing irrespective of the challenges in the consumer goods space,” according to Gbolahan Olgunro, equity research analyst at Cordros Securities Limited.
It is important to note that BUA Foods has an excellent and well diversified product portfolio to compete with peer rivals in the Fast Moving Consumer Goods (FMCG) Industry, which makes its share price attractive because of expected sales and profit growth.
It has a 1.5million MTPA Combined Sugar Production Capacity, eight ultramodern factories for producing rice, sugar, pasta, flour and 20,000 hectares of arable land located in Lafiagi, Kwara State.
The new consumer goods firm has 2 ultra-modern and automated sugar refineries (BUA Sugar Refinery, Lagos and Eastern Sugar Refinery, Port Harcourt) with a combined installed refining capacity of 1,500,000 metric tonnes.
“BUA is the only sugar refiner to have refining capabilities outside Lagos, Nigeria. In response to Nigeria’s backward integration policy in the Sugar Industry, BUA Group acquired the Lafiagi Sugar Company (LASUCO) in Kwara state in 2008 and established the Bassa Sugar Company in Kogi State,” said analysts at CSL Stock Broker in a note to clients.
There had been merger and acquisition activities in the Flour Mills space with the acquisition of HoneyWell by Nigeria’s largest flour miller, Flour Mills of Nigeria Plc.
BUA Foods is poised to create a more competitive arena as it has established a state-of-the art plant in Port Harcourt, to cater to the growing needs of fast-growing young population who crave for consumption.
The plant currently has 576,000 tons of flour milling capacity. Its closest competitors are Flour Mills of Nigeria, Honeywell Flour Mills, and Olam.
The listing marks a new beginning for a Company playing a critical role in the FMCG industry, one that’s highly committed to nourishing lives with all our product offerings. The listing resonates with our commitment to sustainable growth as we nourish and enrich the lives of consumers by delivering high quality products at competitive prices, according to Ayodele Abioye, Acting Managing Director, BUA Foods.
“This listing creates an avenue for everyone to be a part of the success story of BUA Foods and benefit from the growth opportunities ahead,” said Abioye.
However, BUAFoods will be operating in a tough and unpredictable macroeconomic environment as consumer goods firms have been hard hit by inflationary pressures, currency volatility, poor regulations, supply chain bottlenecks due to gridlock at the ports, and unstable power supply.
Of course, consumer goods firms were forced to pass on high input costs to consumers in the form of higher prices or hike on key products, but there are fears that further increment may be unrealistic since consumer wallets are being squeezed by spiralling transportation costs and huge utility bills.
Higher unemployment rates mean essential goods are gradually becoming inaccessible to Nigerians, a double whammy for firms as sales will be undermined.
While November inflation of 15.40 percent was lower than the 15.99 percent printed in October, it is far below the 6-9 percent central bank’s target range.
The jobless rate in Nigeria rose to 33.3 percent in the three months through December, according to a report published by the National Bureau of Statistics. That’s up from 27.1% in the second quarter of 2020, the last period for which the agency released labour-force statistics.
Companies are spending copiously on diesel to power generator plants at the factory, an expense line that bloats the cost of production and results in deteriorating profit margin.