In the face of economic challenges, the consumer goods sector experienced bleak financial outcomes for the 2023 fiscal year.
PZ, Cadbury, International Breweries, Dangote Sugar, Nestle, Nigerian Breweries, and Guinness Nigeria all suffered losses after tax during the period. Of notable concern were PZ, Cadbury, and Nestle, where the erosion of shareholders’ funds was observed.
Despite the challenging financial performance in 2023, investors have maintained confidence in the stocks, as indicated by their YtD gains in Q1 2024.
The collective market capitalization of the 15 companies within the Consumer Goods Index surged by 49.32% to reach N9.389 trillion.
Concurrently, the Index saw a significant gain of 44%, outperforming the broader market’s Year-to-Date gain of 39.84% for Q1 2024.
The growth appears to be largely driven by outstanding individual stock performances with BUA Foods, PZ, Flour Mills, Honeywell Flour, Unilever, and NNFM leading the way as illustrated here.
Northern Nig Flour Mills +6.18% YtD
In 2023, NNFM experienced an impressive surge in its share price, increasing by 639.84% YtD from N6.15 to N45.50.
Continuing into this year, NNFM has sustained its upward trajectory, with its share price rising to N48.30 in Q1, marking a 6.18% increase. This performance ranked NNFM as the 6th best-performing stock on the NGX Consumer Goods
The impressive financial results for the 2023 fiscal year, ended March 2023, likely contributed significantly to boosting investor confidence and attracting interest in the company’s shares.
The company recorded 46% growth in operating profit to N568 million from N388 million in 2022.
A review of its performance for the first nine months of the 2024 financial year suggests that the company is poised to sustain the trajectory.
Operating profit surged by an impressive 347% to N1.571 billion, surpassing the company’s operating profit for the entire 2023 fiscal year.
Unilever Plc +13.18 YtD
Unilever’s shares gained 13.18% in Q1 2024, constituting nearly half of the total YtD achieved in 2023.
Following its resurgence to profitability in 2021, the company has demonstrated steady growth in profits.
In 2023, profits surged by 89%, resulting in earnings per share reaching N1.47, marking the highest figure in five years.
Analysts anticipate earnings per share to reach N2.65 in 2024.
Honeywell Flour Mills Plc + 17.47% YtD
HONYFLOUR experienced a gain of 17.47% in Q1 2024, positioning it as the 4th best-performing stock.
This implies that an initial investment of N1 million in this relatively low-priced stock at the beginning of the year could have yielded N174,699 unrealized gain.
However, it is important to note that Honeywell Flour is currently grappling with profitability issues.
According to its financial report for the nine-month period ended in December 2023, the company posted a substantial loss after tax of N9.230 billion.
With a YoY revenue growth of 9.31% in the first nine months, indicating moderate expansion, and a price-to-sales ratio of 3.57, investors seem optimistic about potential sales growth in the future.
If the company continues to deliver on its growth prospects and meets or exceeds investor expectations, it could lead to increased demand for the stock.
Flour Mills + 18% YtD
Flour Mills Nigeria is currently the 26th most valuable stock on the NGX with a market capitalization of N160.325 billion.
Flour Mill’s share price appreciated by 18% in Q1 2024, representing about 101% of its overall share price growth in 2023.
Flour Mills Nigeria ranks highest in terms of revenue and asset base among its peers in the consumer goods sector.
Its return to profitability in the third quarter of the fiscal year, ended December 2023, is believed to have been a key driver behind the recent surge in its share price.
Earnings for Q3 grew by 91%, reaching N8.225 billion compared to the comparatively lower N816 million recorded in Q2.
PZ Cussons +42.32% YtD
In Q1 2024, PZ Cussons’ share price surged by 42.32%, ranking it second. Prior to this, in 2023, it achieved a YtD gain of 132%.
This surge notably boosted the company’s market capitalization, soaring from N106.102 billion in 2023 to N150.878 billion in Q1 2024.
Despite these gains, it is essential to note that PZ is currently unprofitable. In Q3 2024, the company reported a loss after tax of N94.780 billion, primarily attributed to a significant FX loss of N163.2 billion, resulting in negative earnings per share of N23.87.
However, there’s anticipation for improvement, with earnings per share expected to reach N0.08 by the end of the 2024 financial year in May 2024. This expectation could be contributing to the ongoing rally in the share price.
BUA Foods +96.43% YtD
BUA Foods leads the FCMGs with an impressive 96.43% YtD share price growth in Q1 and ranks 5th on NGX in terms of share price appreciation.
The company began the year with a share price of N193.40 and closed Q1 at N379.90, driving its market capitalization to N6.84 trillion, the 3rd highest behind Airtel Africa and Dangote Cement barely 2 years after its listing on NGX.
Since its market debut at N48 in 2022, BUA Foods’ shares have been on a steady upward trend, reaching its current N379.90 per share, representing about 691%.
BUA Foods’ financial performance over the years appears to be the driving force behind the share price rally. Revenue and earnings growth has been impressive. The salt segment, a major revenue driver for the FMCG company, continues to experience high demand, offering prospects for sustained revenue growth, improved profitability, leading to positive investor sentiment.
Moreover, investors can anticipate a dividend income following the company’s decision to increase its dividend payout by 175% to N5.50 per share for the 2023 financial year, with payment scheduled for September 26, 2024.
The first quarter of 2024 presents a critical test. Investors are anticipating sustained growth, leading them to assign a premium to the stock, as evidenced by its price-to-earnings ratio of 61x, surpassing the sector average.
