Raw materials gulp N534bn in Dangote firm, BUA Foods

Bisola David
Bisola David
Raw materials gulp N534bn in Dangote firm, BUA Foods

More than N534 billion was spent on raw materials by food firms BUA Foods, Dangote Sugar Refineries Plc, and Nason Allied Industries Plc in September 2023.

According to The Punch, the three listed corporations spent a total of N534.09 billion on raw materials during the review period. This represents an increase of 18.10 percent over the N452.22 billion spent on raw materials in 2022.

Out of the three companies, BUA Foods had a cost of raw material increase of around 78%. Its raw material expenditures increased from N173.53 billion to N310.15 billion as of September.

BUA Foods stated in a trading update that went along with its financial statement that higher energy and raw material costs were the main cause of the company’s cost of sales increase (+74.1%) to N340.6 billion in the first nine months of 2023 (9M 2022: N195.6 billion).

The statement read, “The environment of high input costs and the continued depreciation of the Naira in relation to the US dollar significantly affected raw material prices.” As a result, production costs increased.

In September 2022, Nascon Allied Industries Plc’s cost of raw materials increased by 4.04 percent, from N22.37 billion to N23.27 billion.

Nascon reported a profit of N11.01 billion for the year under review, an increase of around 281.95 percent over the N2.88 billion earned the year before. Furthermore, its revenue rose to N59.11bn from N40.61bn in September 2022.

However, one food manufacturer that saw a decrease in raw material costs over the evaluation period was Dangote Sugar. From N256.33 billion in September 2022 to N200.66 billion, a decrease of 21.71% was observed.

DSR reported a profit of N24.83 billion in September 2023, but a loss after tax of N27.027 billion, compared to a turnover of N309,71 billion, or around 7.42 percent higher than that of the previous year’s N288.32 billion.

Dangote Rice Company Limited will be a part of the merger that Nascon and DSR have agreed to. A large food company will emerge from the transaction to compete with BUA Foods for market dominance.

In October, international rating agency Moody’s predicted that Dangote Sugar Refinery’s foreign debt presents a high-risk profile due to its exposure to a volatile Nigerian market and the current global economic conditions signalling potential imbalances, despite the company’s strong financial fundamentals.

Additionally, it stated that Moody’s expects sugar import costs to rise further and put pressure on gross margins, which are currently 3.4 times lower than the company’s debt, due to the devaluation of the Nigerian currency following the Central Bank of Nigeria’s unification of exchange rates.

A considerable increase in input costs midway through the third quarter of the year had a negative influence on company activities, according to the September Stanbic IBTC Bank Nigeria Purchasing Managers’ Index, which offers an overview of activity in the Nigerian economy.

“Both overall input costs and output charges increased to the largest extent since the survey began almost a decade ago. Once more, inflation was a reflection of a weaker currency and increased transportation expenses brought on by the elimination of the fuel subsidy,” according to a part of the report.

Consequently, corporations escalated their selling prices at an unprecedented rate, with the inflation rate surpassing the previous high set in December 2021.

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