Four consumer goods firms demonstrated improved efficiency in utilising funds sourced through equity as the return delivered on those funds appreciated in three months to March 2019.
The return on shareholders’ funds of two food and beverage giants, Cadbury and Nestle Nigeria, and two sugar producers, Dangote Sugar and Mcnichols, average 8.3 percent in the first quarter of the current year, 2.6 percentage points higher than 5.7 percent recorded in the previous comparable period.
The return on equity metric appraises a company’s level of efficiency at generating profit from its shareholders’ investment, and shows how much profit each naira of ordinary shareholders’ equity generates. A higher ROE figure depicts good management ability to generate income from the equity available to it.
Given the first quarter ROE figures, the four players in the consumer goods space generated N8 per each unit of owners’ funds, a quarter more than N6 realized a year earlier.
Nestle outshined peers with a ROE figure of 20.4 percent in the first three months of 2019, implying that the company realized N20 from every naira of owners’ funds, 25 percent higher than N16 generated in three months to 2018.
The Lagos-based food and beverage giant grew net earnings nearly by half to N12.9 billion in the first quarter, faster than shareholders’ fund which climbed 18 percent higher to N62.9 billion.
Nigeria’s largest sugar producer, Dangote Sugar grew return on owners’ funds to 7 percent, 2 percentage points higher than N5 realized in the period.
The sugar maker was able to deliver better return as its net income surged 33 percent to N7 billion in 2019’s first quarter, and total equity dipped marginally by 1.35 percent from N107 billion twelve months earlier to N105 billion.
Cadbury delivered N4 on each naira of stockholders’ equity in the review quarter, 23 times higher than 17 kobo realized in the same period of the previous year.
The food products maker’s spike in ROE was triggered by massive acceleration in profit from N22 million to N507 million, dwarfing the four percent growth in shareholders’ equity to N13 billion.
Mcnichols elevated returns on shareholders’ investment by 2.4 percent in the review quarter, an uptick from 1.8 percent recorded in the previous comparable period.
The sugar maker was able to deliver higher returns as its 40 percent spike in bottom-line to N8.1 million, outstripped four percent rise in stockholders;’ equity.
The cumulative net income of the four players climbed to N20.4 billion in first quarter this year, indicating a 146 percent surge over N13.9 billion in the previous corresponding period.
Meanwhile, the combined stockholders’ equity of the said firms climbed five percent higher from N173.9 billion to N182.4 billion.
Consumers goods firm are facing hard times as stifled consumers’ disposable income, decrepit infrastructure, tough business environment, sluggish economic growth, shift from consumers’ tastes to cheaper brands and intense competition continues to haunt their top and bottom-lines.
The food, beverage and tobacco sector, a synopsis of performance of economic activities in the consumers goods sector, slowed for three straight quarters to 1.76 percent in the first three months of 2019, a reflection of woes bedevilling players in the industry.
Israel Odubola
