Consumer goods sell off is a golden opportunity to Buy these stocks

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While the consumer goods industry is the hardest hit by a harsh and unpredictable macroeconomic environment, the broader market selloff has created an opportunity for many stocks.

Tremendous opportunity arises whenever stock sell off arises, but investors with weak stomach for volatility are advised to sit on the side-lines and watch.

Investment House Cordros Securities Limited have a Buy ratings on  Dangote  Sugar (DANGSUGAR), Flour Mills of Nigeria (FLOURMILL), NASCON Allied  Industries  (NASCON)  and  PZ  Cussons  Nigeria  (PZ), while we have ‘HOLD’ ratings on Nestle Nigeria (NESTLE) and Unilever Nigeria (UNILEVER).

Dangote Sugar’s shares traded at 7.67 times earnings while share price closed at N10.35 as of 2:00 pm Lagos-July 16 2019-; revenue for the first three months through March 2019 dipped by 7.24 percent.

The valuation trend of the producer of the sweetener  shows revenue fell by 26.44 percent in December 2018 as price to earnings stood at 6.58 times, and the share price closed at N21.80 as of March 20 2018.

As of March 20 2017, Dangote Sugar shares traded at N6.50, while P/E ratio was 5.41 times earnings; revenue grew by 20.44 percent as at December 2017. As of March 20 2016, its shares traded at N5.70 as revenue spiked by 67.95 percent; P/E ratio stood at 6.12 times in the period under review; Revenue in that period was up 6.53 percent in December 2016.

NASCON Allied Industries shares closed at N15.50 as of 2:00 pm in Lagos-July 16 2019- while the shares traded at 9.80 times earnings; sales for the first quarter of 2019 were flat.  The company’s P/E ratio stood at 10.39 times earnings in 2018 while shares closed at N21.70 as of March 20 2018; revenue as at December 2018 fell by 4.80 percent.   

As of March 20 2017, … Read More...

Analysts see no relief in sight for Nigeria’s declining purchasing power

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Concerns have been raised by analysts on the inability of Nigerians to increase spending as they see no relief in sight going into the second half of the year.

This is on the back of fragile economic recovery which has eroded the purchasing power of many in a country that has the poorest people in the world.

“Recent happenings within the Nigerian economic and political space continue to put pressure on the income of consumers and consequently the consumer spending. Rising levels of inflation continue to erode the real value of the Nigerian consumer income reducing thus their purchasing power, and  coupled with ever increasing unemployment level further compounds the woes of the average Nigerian consumer as their demand for goods and service prints at an all-time low,” Abayomi Ogunjobi, Head Investor Relations/CEO Arrhenn said.

The dampened consumers’ wallet among other factors; smuggling of cheap products, insecurity in the Northern Nigeria, and the Apapa gridlock has affected the performance of firms in the Fast Moving Consumer Good (FMCG) sector.

“The Consumer goods space remains fundamentally weak particularly due to Weak consumer pockets, Increasing Brand competition and inability to pass through increasing costs. The implication of this is lower margins for most of the FMCG companies,”Ayorinde Akinloye, a consumer goods analyst at Lagos-based CSL Stockbrokers said.

Data from the National Bureau of Statistics as analysed by BusinessDay revealed that since 2015, Nigeria’s annual population growth rate of 2.6 perecnt has remained lower than the country’s economic growth rate, even after its exit from recession in second quarter of 2017.

According to World Data Lab, a predictive analytics social enterprise, Nigerians living in extreme poverty crossed the 83 million mark in 2018, surpassing India’s number of extremely poor at 73 million.

This means that almost one Read More...

Beer drinkers downgrade to cheap brands as economic woes bite

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She scampered into the empty hall with a scowl on her face. Madam Elizabeth Johnson has every reason to be unhappy as her beer parlor has been as calm as a grave yard since last year.

The 51 year old seller said she struggles to sell a cartoon a day and she has asked her staff to leave since their wage bills was becoming an unbearable liability.

Six years ago, her joint was so busy that one would have to squeeze himself to pass through and the spacious bar was so full that white plastic chairs had to be arranged outside for thirsty customers to sit and drink.

“ l feel sad watching my business crumble before me. Times are hard and a lot my customers have lost their jobs while the traders are complaining of slow business activities,” said Johnson.

It is not surprising that Madam Elizabeth knows when workers salaries are paid. This is because the Maya man (a popular name for lovers of alcohol) can be chatty under the intoxication of liquor, and where more than two, three, and four meet every day, there exist a fellowship.

One beer to rule them all, one beer to find them, one beer to bring them all and in the darkness they shall find themselves.

Madam Johnson is one out of thousands of beer parlous operators hit by low patronage as consumer spending continues to dwindle, forcing many Nigerians to switch to affordable alternatives like local sachet  alcoholic drinks.

The local alcoholic producers are Intercontinental Distillers Limited, IDL, makers of Eagle Schnapps, Chelsea Dry Gin, Action Bitters, and Bull London Dry Gin, Grand Oak Limited, marketers of the Lord’s Dry Gin and Regal Dry Gin, Euro Foods and Distillers Limited, producers of Sabrina.    

The economy hasn’t … Read More...

Consumer goods firms’ mid-year performance may remain unimpressive as headwinds persist

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Nigerian listed consumer goods firms witnessed a tough first quarter as dampened consumers’ wallet in the light of fragile economic recovery, smuggling of cheap products, insecurity in the Northern part of the country, Apapa gridlock and among others weighed on their earnings performance, a trend analysts say will resurface in their mid-year performance.

Analysis of the first quarter financial results of eight consumer goods players revealed that five firms including Unilever, PZ and Dangote Sugar posted declines in their revenue.

According to Ayorinde Akinloye, analyst at CSL Stockbrokers, the insurgency in the northern region of Nigeria constrained firms’ distribution system, which consequently led to reduced sales revenue.

“For example, about 40 percent of  Unilever ‘s revenues  comes from the north, so if anything happens in the north they are going to be seriously affected and it showed in their  Q1 revenue performance,” said Akinloye, adding the only positive thing for them was the stability in the foreign exchange market.

Revenue of Unilever dipped 21 percent to N19.2 billion in the first three months of 2019, from N24.3 billion in the previous comparable period. PZ Cussons’ top-line contracted by 13 percent from N63 billion to N55 billion in the first nine months ranging from June 2018 – February 2019. Note that PZ financials period is different from the rest of the companies

Among the brewers, while Nigerian Breweries and International Breweries saw revenue jumped 3 percent and 35 percent respectively, Guinness’ top-line shed 4 percent.

Food processers like Dangote Sugar and flour revenues declined by 7.3 percent and 13.6 percent respectively.

“Most of them highlighted the delay in terms of clearing goods and the cost. For some companies that is meant to keep their goods for 30 days in terms of inventory days but because of delay … Read More...

Is your loyalty card faithful to you?

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Ngozi Adaeze, 42, a housewife, shops regularly in one of the popular supermarkets around Iyana-Ipaja, a suburb of Lagos. As part of the reward of being a loyal customer over the years, she now enjoys a reward card which she could use to make a purchase based on points accumulated.

“The more I shop, the more points I get. I was even surprised when they started sending me newsletters on new products and prices,” she told BusinessDay.

The urban population in Nigeria is growing at 4.6 percent per annum. By implication, an increasing number of Nigerians now participate in the cash economy and have become consumers.

However, one would expect that this would translate to booming sales and profitability for major retail outlets and supermarkets in the country. Sadly, this is not the case.

The recent economic recession in the country, the worst in 25 years, left several consumers with a shrinking wallet while supermarkets and other retail outlets battle with low patronage from customers.

BusinessDay check shows that major supermarkets now have an incentive programme to reward their loyal customers.

A visit by BusinessDay to Spar store on Opebi, Ikeja area of Lagos, reveals that every customer enjoys a point for every N200 spent which can be used to shop once the points get to 500 and above. It also affords loyal customers to shop for free with their points.

“All our regular customers have loyalty cards as it is their reward,” a shop attendant at Spar told BusinessDay.

At the popular Ebeano Supermarket, customers that purchase N200,000 worth of goods enjoy a loyalty card of N2,000 with which such customers can make a purchase at that price.

“And if it is N400,000, then you have N4,000 free purchases. All you have to Read More...