Dangote Sugar, Nestle, and Cadbury have outperformed peers in all financial metrics in the first quarter even amid pressured consumer spending and high inflationary environment.
High cost of energy, multiple taxations and over regulations, high interest rate/difficult condition in accessing loans in Nigeria, and infrastructure/bad roads/poor rail transport systems, are eating deep into consumer good’s firms’ margins.
Amid the above quagmire, Dangote Sugar’s net income increased by 32.68 percent to N7.0 billion, from a year ago; thanks to cost control measures that help compensate for lower revenues.
Gross margins increased to 33.0 percent in the period under review, from 25.0 percent; this means the largest producer of the sweetener has enough revenue to cover production costs.
Analysts are sceptical that the firm will continue to grow revenue given taunting challenges such as smuggling of products by some competitors.
Cadbury recorded its best performance in three years, a stellar performance that means it has surmounted the headwinds. Its revenue moved by 12.71 percent to N9.28 billion in the period under review; the growth was driven by an upturn in demand for products, cost curtailment, and reduction in the price of key product.
Gross margins moved to 25.58 percent in March 2019 from 21.84 percent the previous year while net margins increased to 5.46 percent from 0.267 percent a year ago.
Nestle Nigeria’s net profit increased by 49.30 percent to N12.84 billion in the period under review against N8.60 billion the previous year while gross profit margin moved to 44.34 percent in March 2019 from 38.18 percent as at March 2018.
The improvement in margins can be attributed to stronger volumes in Infant food and milk products as well as higher year on year (y/y) prices in Milo.
Of the three firms, Dangote Sugar has an attractive valuation as its P/E ratio stood at 7.0 times earnings as at 2:00 pm; this compares to Nestle, 25 times; Cadbury, 38.87 times and earnings.
BALA AUGIE
