9-month earnings of consumer goods players under our coverage were divergent. Driven by brand loyalty, cost-saving measures, balance sheet optimization, NESTLE (Revenue: +9.7%y/y to N203.1bn, PAT: +44.1% to N33.1bn) and UNILEVER (Revenue: +10.7%y/y to N72.3bn, PAT: +105.2% to N9.4bn) posted strong top and bottom-line numbers, despite the pressure on consumer spending.
Contrariwise, the performance of Flour Millers and Sugar Refiners were underwhelming, pressured by the protracted gridlock at the Apapa Port and the activities of Smugglers (in the case of Sugar). This weakened top and bottom line numbers for FLOURMIL (Revenue: 9.67%y/y to N269.7bn, PAT: -45.8% to N5.0bn), DANGSUGAR (Revenue: -28.4%y/y to N116.8bn, PAT: -37.0% to N16.7bn) and DANGFLOUR (Revenue: -16.9%y/y to N83.3bn, PAT: -75.0% to N3.2bn). UACN (Revenue: -18.3%y/y to N55.7bn, PAT: -84.4% to N0.3bn) is also highlighted, as its recent woes were amplified by the crisis in Plateau State which disrupted the operation of a major subsidiary (Grand Cereals Ltd).
In all, our best picks in the sector are NESTLE and UNILEVER, buttressed by their solid balance sheet position, product and brand durability. While we maintain a BUY rating on FLOURMIL and DANGSUGAR, our short-term expectation is dampened by the feedback effect of the Apapa gridlock and smugglers on volume growth. We are neutral on UACN as our rating on the conglomerate remains under review.