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Flourmills, Unilever, Nestle, BUA lead Nigeria’s Food Manufacturing Space

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Flour Mills of Nigeria, Unilever Nigeria, Nestle and BUA Foods have continued to thrive and outperform their peers despite the coronavirus pandemic and scorching operating environment as evidenced in their consistent earnings growth.

Last year, these firms’ shares outperformed the NGX ASI index, which means investors are optimistic of their growth potentials.

Of course, the Foods, Beverage, and Tobacco sub segment of the manufacturing industry in the economy continues to be star performers in the manufacturing space because they produce essential goods required by consumers in order to sustain health or life.

Millers invigorated the stock market late last year as Flour Mills of Nigeria (FMN) bought out the majority stake in rival Honeywell Flour Mills, and the deal sent their share prices rallying.

Of course, Flour Mills and Honeywell recorded double digit growth at the top lines (sales) and bottom lines (profit), thanks to a strong product portfolio, excellent marketing strategy and efficient distribution channels.

Also, the closure of the land borders by the government to curb smuggling and influx of fake products was a boon for these firms as competitors were forced to patronise them.

FMN, the largest miller by market capitalisation in Nigeria, saw 47.23 percent increase in revenue to N522.82 billion as at September 2020 while net income was up 6 percent to N10 billion.

It dominates the retail pasta, semovita and flour market shares, enshrined by its long operational history in Nigeria. The introduction of SKUs (10kg margarine, 15g spread and 750ml Vegetable & Soya Oil) was a success as it supported profit.

Over the past few years, FMN has initiated a couple of policies in order to streamline operating and increase its share of the Nigeria market. For instance, it embarked on a cost cut programme and bolstered its automation process using the latest technology.

“These efforts have helped drive an improvement in efficiency within the group operations, as well as positioning the group to have benefitted from Nigeria’s border closure policy, which lasted between August 2019 and December 2020,’’ said analysts at Chapel Hill Denham.

BUA Foods is steadily growing its market share in the Sugar sector in Nigeria due to aggressive investments in capacity expansion at its refineries and its retail penetration strategy which has driven heightened product availability.

BUA Foods owns the second largest sugar refinery in West Africa, with total sugar refining capacity of 1.5 million MT per annum, which is able to meet 93 percent of Nigeria’s estimated sugar consumption rate in 2020 of 1.6 million MT per annum, as estimated by Fitch Solution in 2020.

According to the Fitch Solution, BUA’s sugar refining capacity has earned the Company a market share of 35% in Q3 2021, representing a 9% increase from its 2020 position of 26% market share.

This was achieved by the addition of 750,000 MT per annum capacity to the Company’s sugar refinery in Port Harcourt.

BUA Foods has developed a distinct reputation for making high-quality products across its business Divisions, evidenced by the Company estimates of its 35% share of the Nigerian sugar market, 20% share of the Nigerian flour market and 20% share of the Nigerian pasta market.

In 2021, the Company was granted a Halal certification for its Sugar Division by the Halal Certification Authority.

The Halal certification states that its certified products are permissible for the followers of Islam and no haram products or procedures are used for its production, packaging, storage and transport.

Guinness Nigeria came out of the woods last year and it is going to ride on the optimism of improved consumer spending following gradual reopening of the economy and elections spending.

The brewer recorded the fastest revenue and operating income expansion among peer rivals, and the allure of its products to consumers is overwhelming.

Its revenue increased by 58.10 percent as at September 2021, and that compares with an uptick in the top line of Nestle, (22.96 percent); Dangote Sugar, (21.97 percent); Nigerian Breweries, (32.14 percent); International Breweries, (21.04 percent); Nascon Allied, (14.06 percent); Honeywell, (19.32 percent), Cadbury, (16.40 percent), and Unilever, 31.27 percent.

Guinness Nigeria’s operating profit margin surged by 1009.72 percent to N6.50 billion as at September 2021, the fastest margin expansion among peer rivals.

Interestingly, rising cost of production has prevented consumer goods firms from translating top line impressive performance into bottom line growth.

Also, foreign exchange scarcity has been bloating input costs while rising costs means these firms will be forced to pass on cost to an already beleaguered consumers who are reeling from inflationary pressures and huge utility bills.

“We traced the futures for most of the raw inputs such as sugar, Wheat, Cocoa, Barley, and Palm oil and found that the prices quoted are beyond the current prices, implying a possible rise in prices,” said analysts at CSL Stockbrokers Limited.

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