In a bid to grab cash amid an uncertain 2023 electoral cycle, rising bond yields, and an economy still growing below trend, Nigeria’s consumer goods firms have increased their appetite for cash by reporting a 16.04 percent increase in cash and cash equivalents.
Consumer goods firms are probably piling cash in case interest rates rise and borrowing becomes more expensive, a scenario akin to the biblical Egypt that saved grains in the time of bountiful harvest in anticipation of looming famine as envisioned by Joseph the dreamer.
For consumer goods firms, having cash provides sufficient funds for companies to honour both short- and long-term obligations to creditors, magnify the earnings of owners by way of steady dividend payment, and pursue expansion plans such as making inroads into products or chains of business.
BusinessDay analysed eight (8) consumer goods firms: Dangote Sugar Refinery, Nestle Nigeria Plc, Unilever Nigeria Plc, International Breweries, BUA Foods, Cadbury Nigeria Plc, Nascon Allied Industries, and Nigerian Breweries.
According to BusinessDay’s analysis, these firms pooled together an aggregate cash and cash equivalent of N373.49 billion in the first half of 2022, up from N321.86 billion reported in the first half of 2021, indicating that they have a healthy amount of cash and cash equivalents which reflects positively on their ability to meet their short-term debt obligations.
Cash equivalents are investment securities that are meant for short-term investing; they have high credit quality and are highly liquid.
Analysts can also estimate whether it is good to invest in a particular company through its ability to generate cash and cash equivalents since they reflect how a company can pay its bills throughout a short period.
The movement of cash and cash equivalents that come in and go out of a company is summarised in the cash flow statements of these firms. The main components of these include operating activities, investing activities, and financing activities.
Our analysis shows that these firms generated N45.72 billion from operations, negative N22.40 billion from investing, and negative N30.25 from financing activities in the first half of 2022.
Company Analysis
Dangote Sugar Refinery
Dangote Sugar Refinery reported cash and cash equivalents amounting to N130.04 billion in the first half of 2022, a 156 percent surge from N50.81 billion reported in the first half of 2021.
The firm has N115.9 billion in short-term deposits, which make up a sizeable portion of its cash and cash equivalents. The company also has N11,7 billion in the bank, N2.34 billion in Nigerian Treasury Bills, and N5 million in cash on hand.
Its net cash generated from operating activities was up 9 percent to N47.25 billion in the first half of 2022 from N43.99 billion in the first half of 2021.
The company’s net cash flow from investing activities for the period is negative N7.96 billion, with a significant portion of that coming from the period’s purchase of property, plant, and equipment totaling N9.91 billion. Interest received of N1.9 billion formed the cash inflow generated from investing activities in the first half of 2022.
Net cash from financing activities reported by Dangote Sugar Refinery was also negative, totaling N12.25 billion in the first half of 2022, having paid dividends and interests amounting to N12.15 billion and N107 million respectively during the period.
Nestle Nigeria
Nestle Nigeria’s cash and cash equivalents dropped by 12.27 percent to N88.18 billion in the first half (H1) of 2022 from N100.51 billion in the first half of 2021.
Its cash and cash equivalents in the first half of 2022 comprised short-term investments of N61.03 billion, and cash and bank balances of N27.15 billion. During the period (H1’2022), its net cash generated from operating activities amounted to negative N12.19 billion, down from N50.76 billion in the first half of 2021.
Net cash from investing activities totalled negative N3.23 billion in the first half of 2022, with finance income and proceeds from selling property, plant, and equipment forming its cash inflows.
Finance income amounted to N4.52 billion, while proceeds from the sale of property, plant, and equipment amounted to N38 million in the first half of 2022. Nestle Nigeria spent N7.79 billion in the purchase of property, plants, and equipment during the period.
The consumer goods firm’s net cash flow from financing activities amounted to N3.09 billion in the first half of 2022, having received proceeds from intercompany and bank loans obtained during the period of N12.88 billion and N7.33 billion respectively.
However, in the first half of 2022, Nestle spent N4.44 billion repaying bank loans, N6.97 billion paying finance costs, N5.27 billion paying dividends, and N445 million on lease payments.
Read also: Unilever records first loss in 7 yrs as costs gulp 73% revenue
Unilever Nigeria
Cash and cash equivalents reported by Unilever grew by 43.54 percent to N63.40 billion in the first half of 2022 from N44.17 billion in the corresponding period last year.
Its cash and cash equivalents during the period comprised N42.94 billion in cash at the bank and in hand, and N20.46 billion in fixed deposits. Its net cash flow generated from operating activities grew by 17 percent to N8.28 billion in the first half of 2022 from N7.05 billion in the first half of 2021.
Unilever spent N639 million on the purchase of property, plant, and equipment, and received interest of N457 million during the period (H1’2022), thereby bringing its net cash used in investing activities to negative N182 million in the first half of 2022.
Net cash used in financing activities totalled negative N397 billion in the first half of 2022, with payments of interest and dividends amounting to N76 million and N321 million respectively.
International Breweries Plc
International Breweries reported a 61.81 percent decline in cash and cash equivalents amounting to N27.61 billion in the first half of 2022 from N72.30 billion in the first half of 2021.
Its cash and cash equivalents comprised N22.16 billion cash at the bank and N5.45 billion restricted cash. The company noted that restricted cash is a collateral deposit held by the bank till the maturity date of forward contracts.
Net cash flow from operating activities reported by International Breweries in the first half of 2022 declined by 67.75 percent to N6.84 billion from N21.21 billion in the first half of 2021.
Net cash outflow from investing activities grew by 1,792 percent to N20.81 billion in the first half of 2022 from N1.10 billion in the same period of 2021.
Cash inflow came from investments in debt securities of N40.37 billion and interest received of N2.19 billion in the first half of 2022, while cash outflow was from the acquisition of property, plant, and equipment during the period amounting to N21.75 billion.
Net cash outflow from financing activities amounted to N66.84 billion, with repayment of borrowings amounting to N62.32 billion and interest paid amounting to N4.52 billion in the first half of 2022.
BUA Foods
Cash and cash equivalents reported by BUA Foods increased by 23.7 percent to N23.28 billion in the first half of 2022 from N18.82 billion in the first half of 2021.
Its cash and short-term deposits for the period (H1’2022) comprise N4.58 million cash in hand and N41.64 billion cash at the bank.
Net cash from operating activities reportedly grew to N20.32 billion in the first half of 2022, up from N20.17 billion in the first half of 2021. Net cash from investing activities of negative N3.04 billion in the first half of 2022, having acquired property, plant and equipment, and biological assets of N3.7 billion and N92 million respectively during the period.
BUA Foods spent money repaying borrowings amounting to N42.57 billion, payment of lease liability of N3.18 billion, and interest payment of N2.15 billion in the first half of 2022. However, it received proceeds from borrowings amounting to N26.42 billion, therefore bringing net cash from financing activities to a total of N-21.48 billion.
Cadbury Nigeria Plc
Cadbury’s cash and cash equivalents were up 20.51 percent to N21.56 billion in the first half of 2022 from N17.89 billion in the first half of 2021.
Its cash and cash equivalent are made up of N4.99 billion bank balances and N16.56 billion call deposits.
Net cash generated from operating activities was reportedly down by 20.58 percent to N2.48 billion in the first half of 2022 from N3.12 billion in the first half of 2021.
Net cash used in investing activities amounted to N922 million in the first half of 2022. The firm spent N1.65 billion purchasing property, plant, and equipment in the first half of 2022, while it received N702 million from interests and N27 million from proceeds of the property, plants, and equipment.
Cadbury’s net cash from financing activities amounted to N2.18 billion in the first half of 2022.
Nascon Allied Industries
Nascon Allied Industries saw its cash and cash equivalents surge by 433 percent to N10.29 billion in the first half of 2022 from N1.93 billion in the first half of 2021.
Its cash and cash equivalents consist of N10.29 billion bank balances and N1.56 million cash on hand. Net cash from operating activities amounted to N3.71 billion in the first half of 2022, up from N971 million in the corresponding period of 2021.
Net cash from investing activities amounted to N-874 million in the first half of 2022, having spent N1 billion purchasing property, plant, and equipment. The firm also received interest income amounting to N136 million during the period.
Net cash used in financing activities was N417 million, largely driven by proceeds from borrowings which amounted to N1.63 billion in the first half of 2022.
The firm paid dividends and lease liabilities amounting to N1.06 billion and N151 million during the period under review.
Nigerian Breweries
Nigerian Breweries’ cash and cash equivalents declined by 40.8 percent to N9.13 billion in the first half of 2022 from N15.43 billion in the first half of 2021.
Its net cash from operating activities totalled negative N30.97 billion in the first half of 2022 from N31.82 billion in the first half of 2021.
Net cash used in investing activities was negative N27.01 billion in the first half of 2022. The firm reported an inflow of N229 million from finance income and N18.6 from proceeds from the sale of property, plants, and equipment during the period.
While the outflows comprised N27 billion from the acquisition of property, plants, and equipment, N202 million from the acquisition of right-of-use assets, and N17 million from the acquisition of intangible assets. Net cash from financing activities totaled N50.39 billion in the first half of 2022.
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