BUA Foods Inventory Management is Best in Class Among Peers

BUA Foods Nigeria Plc can more efficiently move its inventory better than peer rivals, as the largest consumer goods firm by profit is not incurring high storage and holding costs.

For instance, BUA Foods’ efficient inventory strategy validates consistent sales growth as the company is moving inventory efficiently, while contemporaneously adding to shareholders’ value.

BUA Foods has an inventory turnover ratio (ITR) of 32 days as at September 2023, this shows it turned over its inventory every 32 days on average during the year, according to MoneyCentral calculations. In general, the lower the ratio, the better.

That compares to Unilever Nigeria, 96 days; Cadbury, 100 days; Nestle Nigeria, 125 days; Flour Mills of Nigeria, 150 days; Nigerian Breweries, 136 days; Guinness, 305 days; International breweries, 87 days; Champion Breweries, 107 days; Dangote Sugar, 126 days, and Nascon Allied, 107 days.

The average inventory turnover ratio for the largest consumer goods firms is 124 days, which means they are saddled with too much stock, jeopardizing profit margin. In addition to overproduction, significant loss comes from stock that gets damaged in the supply chain before it even reaches the shelf. That includes spoiled food, broken packaging and delayed shipments that compromise shelf life.

Of course, the recent reforms such the removal of subsidies on fuel and unification of exchange rate further squeezed consumer wallets, leading to precipitous drop in demand for products even as firms have been hiking price of key products to fend off rising input costs.

It is noteworthy that too much inventory is not good for consumer goods firms because it drives expenses for handling, storing, and transporting products.

BUA Foods however, recorded the largest expansion in revenue as sales surged by 80.17 percent as at September 2023.

That compares with an expansion of 45.57 percent for Nascon Allied, Dangote Sugar, 7.42 percent; International Breweries, 14.55 percent; Guinness Nigeria, 2.45 percent; Nigerian Breweries, 2.12 percent; Flour Mills, 33.87 percent; Nestle Nigeria, 18.93 percent; Cadbury, 31.17 percent, and Unilever, 25.95 percent.

BUA Foods shares have gained 206 percent so far this year, outperforming the NGXASI index gains of 41.38 percent.

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