capital market

BUA Foods Plc: Revenue rises 74.36%, as operating costs escalate in FY 2023

Published

1 month ago

April 15, 2024

NewsDirect

The performance of Nigeria’s consumer goods companies in 2023 showed increasing divergence in performance and profitability positions as the effect of challenging macroeconomic conditions continued to impact operational costs and profitability positions of consumer goods industry players.

Despite these challenges, BUA Foods Plc demonstrated remarkable resilience, mirroring its strategy, and delivering double-digit growth.

The spectre of inflation loomed as businesses raised prices to cover surging input, operational, and finance costs. currency devaluation, escalating energy expenses, and heightened insecurity also remained elevated in 2023.

Households grappled with dwindling disposable incomes, eroding their purchasing power, and altering consumption patterns compared to preceding years.

The impact of this economic strain was acutely felt by lower-income households, while even those of average means found themselves grappling with the pervasive effects of rising inflation and challenging macroeconomic conditions.

In an outlook statement for 2023 and while delivering the FY 2022 financial report of BUA Foods Plc, Ayodele Abioye, the managing director of BUA Foods Plc, stated that “we remain resolute to navigate the numerous business headwinds to continue delivering double-digit growth with a sustained focus on our market expansion strategy across our business segments.”

This unwavering focus on strategy is what sets BUA Foods Plc apart, leading to its highest sector market capitalisation at N6.84 trillion and its position as one of the most profitable FMCG companies listed on the Nigerian Exchange Limited (NGX).

Revenue and Profitability

BUA Foods Plc’s revenue continued its upward trend, as seen in the past four years. The company’s revenue grew by +74.36 percent to N729.44bn in FY 2023 from N418.35bn in FY 2022. Major contributors to the FY 2023 revenue were the sale of sugar (Fortified), flour and pasta, contributing 86 percent of the FY 2023 revenue. Despite +75.60 percent growth in operating profits to N206.32bn in FY 2023 from N117.49bn, growth in selling and distribution expenses and finance cost by +110.36 percent and +1,054.59 percent to N29.85bn and N100.68bn respectively had a major impact in squeezing pretax returns which grew only by +0.83 percent to N108.12bn FY 2023

Segmental Performance

In 2023, sugar (fortified) emerged as the primary driver of revenue growth for BUA Foods, closely followed by bakery flour and sugar (non-fortified). Molasses, the byproduct of the sugar refining process, made the smallest contribution to revenue.

Despite its significant growth, the wheat bran segment ranked fourth in revenue contribution. Nevertheless, the wheat bran segment holds promise within BUA Foods’ vertical integration strategy and segmental growth initiatives, showing notable potential for future revenue growth

Financial Position

The company’s assets rose by +76.28 percent in FY 2023 to N1,070.44bn from N607.22bn in FY 2022. Asset growth in FY 2023 is attributable to inventory growth, cash and cash equivalents, and, due from related parties, growth by +277.27 percent, +211.30 percent, and +265.60 percent, respectively. BUA Food’s Liability increased by +114.84%, driven by a +207.59 percent growth in total borrowings.

Shareholders’ equity capital climbed by +13.46 percent as growth in returns saw retained earnings grow by +13.95 percent in FY 2023 to N262.06bn from N230.96bn in FY 2022.

Cash Flow

BUA Food Plc’s cash position rose by +259.75 percent as cash and cash equivalents increased to N99.55bn in FY 2023 from N27.67bn, supported by a +212.06 percent growth in current borrowings.

Cash generated from selling the companies’ products and services increased as cash from operating activities rose by +21.72 percent from N124.47bn in FY 2022 to N151.51bn in FY 2023. Net cash received from investment activities grew to N34.59bn in FY 2023 from N15.44bn in a corresponding period in 2022.

Ratios

The fiscal year 2023 witnessed notable enhancements in BUA Foods Plc’s capability to fulfil its short-term obligations, as evidenced by improvements in the current and acid test ratios.

Specifically, these ratios advanced to 0.91 and 1.41, respectively, from 0.90 and 0.81 in the previous fiscal year.

However, the company experienced increased operational and financial costs, leading to a decline in the return on equity (ROE) by -4.57bps to 10.47 percent in FY 2023 from 15.04 percent in 2022. Similarly, the return on assets (ROA) observed only a marginal increase of +3.23bps in FY 2023, reaching 42.78 percent compared to 39.55 percent in 2022.

While the gross profit margin (GPM) expanded to 35.71 percent in FY 2023, reduced net earnings during the same period resulted in a decline of -6.47bps in the net profit margin (NPM) to 15.37 percent, down from 21.83 percent in the corresponding period in 2022.

Notably, BUA Foods Plc experienced a decrease in inventory turnover in FY 2023, with inventory growing to N112.28bn from N29.76bn in 2022. This inventory growth could have contributed to higher storage and holding costs for the FMCG industry leader.

Conclusion

Nigeria’s FMCG sector has been pressured by rising operating costs, growing inventories (probably because of lower demand), and steeper debt. The combination of these factors has doused investor enthusiasm. This does not imply that investors are largely pulling away from the sector, but they are looking closer at how economic fundamentals will affect the sector’s future earnings. Several suppliers have bitten the dust as rising costs and increased insecurity from farm gates to factory floors have squashed profit margins. Insecurity has led to a large pullback in miller suppliers, raising the cost of flour products and exported goods.

A sustained rise in the foreign exchange rate in 2023 led to FMCGs’ foreign exchange losses and put pressure on their costs of goods sold (COGS). Analysts expect the situation to be less severe in 2024 as the naira strengthens against other global currencies.

However, for FMCGs to reduce inventories and lower their prices to encourage higher domestic demand, the domestic security situation must improve, and multiple logistics levies must be tackled.

According to a manager at one of the companies who requested anonymity, ‘with energy costs going up (the federal government has approved a 200% increase in energy tariff for band A power sector consumers), FMCGs will see further operating cost pressures on their bottom lines. Profit margins may be squashed like pancakes.’

He further observed that ‘FMCGs will have to pull out all the stops to get several costs down. BUA has some temporary tax shields from its pioneer status for its pasta and flour milling plants, but the reliefs have started ticking down from last year; the truth is that depending on temporary reliefs for a strategic plan is like swimming in the ocean until the tide runs out, then we will know whose swimming shorts are dangling around their ankles.’

capital market

Seplat Energy recognised as Best in sustainability reporting at ICAN/NGX RegCo awards

Published

17 hours ago

May 21, 2024

NewsDirect

Seplat Energy Plc has emerged winner of the Best in Sustainability Reporting Award at the maiden Corporate Reporting Award, organised by the Institute of Chartered Accountants of Nigeria (ICAN) and NGX Regulation Ltd (NGX RegCo).

The recognition was announced at the ICAN/NGX RegCo Awards ceremony held in Lagos. It was a platform to recognise the top 30 most capitalised companies listed on the Nigerian Exchange Ltd (NGX) for the 2022 financial reporting year.

The awards underscored ICAN and NGX RegCo’s shared commitment to fostering transparency, accountability, and international best practices within the private sector. The evaluation criteria included financial reporting, corporate governance, and sustainability reporting.

Speaking at the ceremony, the president of ICAN, Dr. Innocent Okwuosa, lauded NGX RegCo for ensuring better disclosures and reporting among listed companies.

Okwuosa noted that corporate reporting over time had evolved, as there was a shift from a primary focus on financial reporting to the increasing request to incorporate social and environmental disclosures. He stated that the latter had evolved and had been differently propagated, including but not limited to environmental, social, and governance (ESG) disclosures and late sustainability disclosures.

The ICAN boss explained that good corporate reporting must reflect the best elements of corporate governance, financial reporting, and sustainability reporting, adding that the maiden edition of the award is limited to 30 companies listed on the NGX for ease of administration but will be extended to all the listed companies in the future.

The CEO of NGX RegCo, Mr. Olufemi Shobanjo, in his address said that transparency is one of the key drivers of any economy. Shobanjo stated that transparency ensures full disclosure of information by entities and that such information is easily accessible to members of the public to make informed decisions.

The award was received by the CFO-Designate, Seplat Energy Plc, Mrs. Eleanor Adaralegbe, and the Director, External Affairs & Social Performance, Mrs. Chioma Afe.

In 2021, Seplat Energy unveiled a new corporate strategy based upon two ambitions, to Build a sustainable business and Deliver energy transition. Clearly each of these has sustainability at its heart, and each is made up of three pillars in which Seplat Energy defines its business strategy in terms of specific initiatives that promote sustainability across our business activities. “Now, for Seplat Energy, sustainability is embedded at all levels and across all operations”, Adaralegbe said whilst commending ICAN and NGX RegCo for the recognition and sustained display of professionalism.

capital market

Trading ends negatively with N17bn loss on Friday

Published

2 days ago

May 20, 2024

NewsDirect

Analysis by Nigerian NewsDirect of last week’s Friday trading has shown that the Nigerian stock market lost N17 billion at the close of trading on Friday.

This is as the All-Share Index (ASI) declined to 98,125.73 from 98,233.76 at the close of the previous trading day.

The loss was largely attributed to a value dip in Transcorp Hotel, NEM Insurance, and UPDC stocks.

The three companies shed 9.72 percent, 9.63 percent, and 9.57 percent each to close at N92.00, N8.45, and N4.25 from the initial N101.90, N9.35 and N4.70 per share respectively.

On the positive, PZ, Julius Berger, and Sterling Bank led other gainers with 9.92 percent, 9.53 percent, and 6.67 percent growth in share price to close at N21.60, N79.30, and N4.48 from the previous N19.65, N72.40, and N4.20 per share.

In terms of value, Airtel Africa recorded the highest value for the day trading stocks worth N4.25 billion in 39 deals followed by SEPLAT which traded equities worth N2.3 billion in 113 deals.

Meanwhile, the Nigerian Exchange Limited (NGX) has admitted additional 402,082,657 ordinary shares of 50 Kobo each per share of Cadbury Nigeria Plc on its platform.

This was contained in the NGX’s weekly report seen by Nigerian NewsDirect.

According to the report, the additional shares listed on NGX arose from Cadbury’s conversion of N7,036,446,501.26 intercompany loan to equity.

The statement read, “Trading Licence Holders are hereby notified that additional 402,082,657 ordinary shares of 50 Kobo each per share of Cadbury Nigeria Plc (Cadbury or the Company) were on Thursday, 16 May 2024, listed on the Daily Official List of Nigerian Exchange Limited (NGX).”

The additional shares listed on NGX arose from Cadbury’s Conversion of N7,036,446,501.26 Intercompany Loan to Equity.

With this listing of the additional 402,082,657 ordinary shares, the total issued and fully paid-up shares of Cadbury has now increased from 1,878,201,962 to 2,280,284,619 ordinary shares of 50 Kobo each.”

capital market

ICAN, NGX honour Dangote Cement for excellence in corporate reporting

Published

2 days ago

May 20, 2024

NewsDirect

Dangote Cement has been honoured with the top prize at the inaugural Corporate Reporting Award, jointly organized by the Institute of Chartered Accountants of Nigeria (ICAN) and NGX Regulation Limited.

The leading cement manufacturer received the Platinum award for excelling across all three reporting categories, showcasing exemplary reporting practices that comprehensively address all relevant aspects of corporate reporting. According to the organisers, the scoring criteria involved a combination of average scoring and assessments from individual judges.

In addition to the Platinum award, Dangote Cement also clinched the Best in Class Award for Excellence in Corporate Governance, surpassing other nominees such as Access Holdings, Airtel Africa, ETI, MTN Nigeria, SEPLAT Energy, and Stanbic IBTC Holdings Plc. Airtel Africa and Seplat Energy were recognized for Financial Reporting and Sustainability Reporting, earning Gold and Silver awards respectively in the overall category.

Edward Imoedemhe, the Company Secretary/General Counsel of Dangote Cement Plc, expressed gratitude for the recognition, emphasizing the company’s dedication to corporate reporting standards. He said that the awards will serve as motivation to continually elevate performance in this area.

“We are grateful to the organisers for this honour which is a testament to our commitment to corporate reporting and best practice. We will continue to raise the bar,” he assured.

Olufemi Shobanjo, CEO of NGX Regulation Limited, highlighted the significance of the award in promoting transparency and accountability among listed companies, anticipating a positive ripple effect on both listed and private companies in Nigeria.

ICAN’s 59th President, Innocent Okwuosa, underscored the importance of corporate reporting excellence in attracting capital flows to the market. He emphasized the role of transparency in fostering investor confidence and reiterated ICAN’s commitment to promoting accountability and transparency in the private sector.

“It is generally agreed that capitals will flow to markets that foster greater transparency and this effort is aimed at this. It also re-enforces the public interest mandate of ICAN in extending accountability and transparency to the private sector,” he said.

The maiden Corporate Reporting Award recognized the top 30 most capitalized companies listed on the Nigerian Exchange Limited for the 2022 financial reporting year.