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The importance of the consumer goods sector cannot be overemphasized in any economy. While there might be doubts about the longevity of some other sectors like oil and gas, it is an easy bet that the consumer goods sector won't go extinct.
Consumer goods are products bought for consumption by the average consumer. Alternatively called final goods, consumer goods are the end result of production and manufacturing and are what a consumer will see stocked on the store shelf. Clothing, food, and jewelry are all examples of consumer goods. Basic or raw materials, such as copper, are not considered consumer goods because they must be transformed into usable products.
Knowing that these products are part of the everyday needs of humans sounds like a good reason for any potential investor to not want to ignore the companies producing them.
One of the largest consumer goods groups is called fast-moving consumer goods (FMCGs). This segment includes nondurable goods like food and drinks that move rapidly through the chain from producers to distributors and retailers, then on to consumers. Companies and retailers like this segment as it contains the fastest-moving consumer goods from stores, offering high shelf-space turnover opportunities.
The Nigerian Exchange Ltd (NGX) Consumer Goods Sector Index comprises twenty (20) FMCGs that deal in the manufacturing of a variety of consumer goods ranging from flour, sugar, beverages, beer, and so on. Although this sector has only grown 3.7% year-to-date, it has outperformed some other sectors such as banking and insurance.
If you were thinking of investing in equities on the Nigerian stock market, and have picked a fancy towards this sector, we would be looking at the 5 cheapest consumer goods stocks based on their P/E ratio (price to earnings ratio). For context, the P/E ratio of a company is gotten by dividing its share price by its earnings per share. The lower the P/E ratio, the cheaper the stock.
Cadbury Nigeria Plc is known for manufacture and sales of branded fast-moving consumer goods to the Nigerian market and exports in West Africa. The Company produces intermediate products, such as cocoa butter, liquor, cake, and powder. It exports cocoa butter, cake, and liquor to international customers, and cocoa powder locally. It operates through three segments: Refreshment Beverages, Confectionery, and Intermediate Cocoa Products. The Refreshment Beverages segment includes the manufacture and sale of Bournvita and Hot Chocolate. The Confectionery segment includes the manufacture and sale of TomTom and Buttermint. The Intermediate Cocoa Products segment includes the manufacture and sale of cocoa powder, cocoa butter, cocoa liquor, and cocoa cake.
Cadbury Nigeria currently has a market capitalization of N16 billion and shares outstanding of N1.88 billion. In Q1 2021, the beverage giant reported a marginal year-on-year increase in revenue of 4.29%, while profit after tax declined heavily by 62.19% in the same period.
The company however recorded an 11.41% growth in total assets in the same period from N33.21 billion to N37 billion while earnings per share dropped by 62% from N34.02 to N12.86.
Cadbury Plc has a P/E ratio of 13.44x and its share price currently stands at N8.60 with a year-to-date return of –4.44%.
Nascon Allied Industries Plc is known for salt refining and distribution. The company engages in the processing of raw salt into refined, edible, and industrial salt. Its segments include Salt, Seasoning, Tomato, Vegetable Oil, and Freight income.
Nascon Plc has a market capitalization of N39.74 billion. In the first quarter of the year, the company declared a 21.22% growth in revenue from N6.88 billion to N8.34 billion and reported N723 million profit after tax (PAT) to reflect a growth of 15.20%, despite the 15.20% increase in taxation.
Nascon’s total assets grew by 5.78% from N44.78 billion to N47.37 billion and its P/E ratio stands at 8.68x. It currently trades at N15.00 and has a year-to-date return of 3.45%.
Dangote Sugar Refinery Plc is engaged in refining raw sugar into edible sugar and selling the product. The company is also engaged in the cultivation and milling of sugar cane.
The company has a market capitalization of N212 billion with 12.1
Dangote Sugar Plc reported a growth of 41.46% in revenue for Q1 2021, while gross profit grew by 41.52% from N12.72 billion to N18.04 billion. Net profit for the same period appreciated by 30.30% from N6.37 billion to N8.30 billion.
In the same period, total assets appreciated by 5.48% from N276.76 billion to N291.94 billion year-to-date.
Similarly, earnings per share went up by 28.30% from N0.53 to N0.68 in the current period. The company has a P/E ratio of 7.15x and currently trades at N17.45.
Dangote Sugar’s share price has a Year-to-Date return of -0.85%.
Vitafoam Nigeria Plc is a foam manufacturing company based in Ikeja, Lagos. It is one of Nigeria’s largest foam manufacturers, producing both flexible and rigid polyurethane products. The company also owns an interest in Vitafoam Ghana and Vitafoam Sierra Leone.
The company has a Market capitalization of N18.76 billion. It declared a 55.77% increase in revenue, while net profit appreciated by 47.34% from N1.69 billion to N2.49 billion. Total Assets also grew by 18.21% from N21.64 billion to N25.58 billion.
Earnings per share increased by 66.68% from N1.30 kobo to N2.17 kobo, with a P/E ratio of 5.06x.
Vitafoam Plc’s share price has appreciated by 96.79% year-to-date and it currently trades at N15.35.
Northern Nigeria Flour Mills Plc is a milling company in Nigeria that mills wheat and other grains and sells its products under the Golden Penny brand name. Products from NNFM include wheat flour, Semovita, wheat offal, masa flour, germ flour, Masavita and corn offal, Golden Penny flour, Golden Penny sugar, and Golden Penny rice.
The company has a market capitalization of N1.10 billion and recorded a growth of 8.17% in net profit from N64.64 million to N69.92 million in the Audited Financial Statement for the year ended March 2021. In the same vein, earnings per share appreciated by 8.33% from N3.60 to N3.90.
The company declared a total asset of N7.37 billion at the end of the period. However, its share price has depreciated by –8.75% year-to-date. It has a P/E ratio of 3.34x and currently trades at N6.15.