Nigeria’s Commodity Imports Index Up By 0.13% in Q4 2020 – NBS

Esan Bolaji
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Nigeria’s Commodity Imports Index Up By 0.13% in Q4 2020 – NBS

The National Bureau of Statistics (NBS) says Nigeria’s commodity group import index rose by 0.13 in Q4 2020. The NBS disclosed this in its quarterly Commodity Price Indices and Terms of Trade (Q3 2020) published on its website. According to the report, the rise in commodity importation was driven by Base metals and articles of base metals, Boilers, machinery and appliances; parts thereof and Products of the chemical and allied industries.

The All-commodity group export index decreased by 0.25% due to declines in the prices of wood and articles of wood, wood charcoal and articles, Vehicles, aircraft and parts, Base metals and articles of base metals.

  • The All products terms of trade (TOT) index, on average, decreased by 0.39% as a result of declines in the prices of base metals and articles of base metals, wood and articles of wood, wood charcoal, products of the chemical and allied industries.
  • The all-region export index decreased by 0.25% due to declines in export prices to all All-regions except Asia
  • The All-region group import index rose 0.13% due to increases in import prices across All-regions except Africa and Europe
  • The All-region terms of trade on average declined by -0.39% due to unfavourable terms of trade across all regions.
  • The major export and import market of Nigeria in Q42020 were India, Spain, the Netherlands, the United States  and China.
  • The major export to these countries were  crude petroleum and natural gas.
  • The major imports from these countries were Motor spirits, Used vehicles, motor cycles and antibiotics.

The CBN's move against abuse of FX: Our thoughts

Terms of Trade

The terms of trade (TOT) represent the ratio between a country’s export prices and its import prices. The ratio is calculated by dividing the price of the exports by the price of the imports, usually in percentage terms.

An increase in the terms of trade between two periods (or when TOT is greater than 100%) means that the value of exports is increasing relative to the value of imports, and the country can afford more imports for the same value of exports.

For example, an increase in the price of oil between two periods (with oil production remaining the same) is likely to increase or improve the terms of trade for Nigeria and vice versa. The TOT is recorded as an index and can be used as an indicator of an economy’s health. 

Commodity Price Index October To December 2020

All-commodity group import index

The All-commodity group import index increased by 0.13% between October and December 2020. This was driven mainly by an increase in the prices of Base metals and articles of base metals (1.0%), Boilers, machinery and appliances; parts thereof (1.03%), and Products of the chemical and allied industries (0.75%).

However, the index was negatively affected by animal and vegetable fats and oils and other cleavage prods. (-1.06%), Prepared foodstuffs; beverages, spirits and vinegar; tobacco (-0.66%) and Plastic, rubber and articles thereof (-0.37%).

Between October and November 2020, the All-commodity group import price index decreased by 0.23%. The index was driven by decreases in the import prices of Boilers, Machinery and Appliances (-1.77%), Prepared foodstuffs, Beverages, Spirits and Vinegar (-1.35%) and Animal and Vegetable fats and Oils (-1.20%).

It was offset by an increase in the prices of Products of the chemical and allied industries (1.48%), Wood and articles of wood, wood charcoal and articles (1.18%) and Mineral products (0.49%).

Between November and December 2020, the All-commodity group import index grew by 0.36%, driven by an increase in import prices of Boilers, Machinery and Appliances (2.80%) as well as Base metals and Articles (1.91%). It was negatively affected by fall in prices for products of the chemical and Allied industries (-0.73%), mineral products (-0.71%) and Wood and Articles of wood, wood charcoal and Articles (-0.58%).

All-commodity group export index

The All-commodity group export index decreased by 0.25% between October and December 2020. This was due to decreases in the prices of wood and articles of wood, wood charcoal and Articles (-0.49%), Vehicles, Aircraft and Parts (-0.44%), Base Metals and Articles of Base Metals (-0.41). This was partly mitigated by a increase in the prices of boilers, Machinery and Appliances (0.66%).

Between October and November 2020, the All-commodity export price index fell by 0.49%. This was a result of decreases in the prices of wood and articles of wood, wood charcoal and articles (-0.98%), Vehicles, aircraft and parts (-0.88%) and Base metals and Articles of Base Metals (-0.83%). This was offset by the prices of prepared foodstuffs, beverages, spirits and vinegar (1.60%), Boilers, Machinery and Appliances (1.31%).

Between November and December 2020, the All-commodity group export index rose by 0.23%. This was driven by increases in the prices of wood and articles of wood, wood charcoal and Articles (0.50%), Vehicles, Aircraft and parts (0.44%). However, the index was negatively affected by declines in the prices of Boilers, Machinery and Appliances (-0.65%), prepared foodstuffs, beverages, spirits and Vinegar (-1.88%) and Others.

Terms of trade by commodity (2018 Jan=100)

The All-commodity terms of trade for October, November and December 2020 stood at 100.43, 100.17 and 100.04.

The All-commodity group terms of trade fell 0.26% in November, 0.13% in December and on average by 0.39% between October and December 2020. The decline in terms of trade between October and December was driven by Base metals and articles of base metals (-1.42%), wood and articles of wood, wood charcoal (-1.05%), Products of the Chemical and Allied Industries (-0.93%). The decline was, however, mitigated by increases in the prices of Animal and Vegetable fats and oils and other cleavage products (0.90%), Prepared foodstuffs, beverages, spirits and vinegar (0.44%), as well as Plastic, Rubber and Articles thereof (0.16%).

Between October and November 2020, the All-commodity terms of trade decreased by 0.26%. The products responsible for the decrease were wood and articles of wood, wood Charcoal and articles (-2.14%), products of the Chemical and Allied Industries (-1.89%) and mineral products (-1.0%). This was offset by Boilers, Machinery and Chemical Appliances (3.14%), Prepared foodstuffs, beverages, spirits and vinegar (2.99%).

Between November and December 2020 the All-commodity terms of trade fell by 0.13%. This was as a result of declines in the prices of Boilers, Machinery and Chemical Appliances (-3.36%), Prepared foodstuffs, Beverages (-2.55%) and Base metals and Articles (-1.46%). The decline was offset by increases in the process of wood and articles of wood, wood charcoal and articles (1.09%) and Mineral products (0.97%).

All-region Group export index

The all-region export index decreased by 0.25% between October and December 2020 due to declines in export prices to All-regions except for Asia (Africa -1.18%, Europe -0.27%, America -0.19 % and Oceania-0.17%).

During the quarter, exports to Asia recorded an increase of 0.16%. The month –on-month changes show a decrease of 0.49% in November and a slight increase of 0.23% in December.

The monthly percentage change between October and November 2020 was due to decreases in the prices of exports to all All-regions except Asia (which increased by 0.33%).

The monthly change between November and December 2020 stood at 0.23%. This was a result of higher export prices to All-regions with the exception of Asia (-0.17%). 

All-region Group import index 

The All-region group import index rose 0.13% between October and December 2020 due to increases in import prices across all All-regions except for Africa and Europe (Oceania 0.75%, Asia 0.59% and America 0.53%). Africa and Europe recorded price declines of 0.22% and 0.24% respectively.

The monthly percentage change showed a decrease of 0.23% in November but an increase of 0.36% in December.

Between October and November 2020, the All-region import index declined by 0.23% due to decreases in the import prices from Asia (-1.25%) and Africa (-0.44%). This was offset by higher import prices from Oceania (1.47%), America (1.04%) and Europe (0.21%).

 Between November and December 2020, the All-region group import index recorded an increase of 0.36%. This was driven by Asia (1.84%) and Africa (0.22%) but offset by Oceania (-0.73%), America (-0.52%) and Europe (-0.45%). 

Terms of Trade by Country Regions [2018 Jan=100]

The All-region group terms of trade index stood at 100.43 in October, 100.17 in November and 100.04 in December.

The terms of trade by region declined by 0.26% in November and 0.13% in December. The All-region terms of trade on average declined by -0.39% due to unfavourable terms of trade across all regions.

Merchandise Trade By Top Five Partners And By Major Commodities (N’million) Q4, 2020

INDIA

Total exports to India in Q4 was valued at N547.02 billion or 17.12% of total export. The largest export commodity to India was Petroleum oils and oils obtained from bituminous minerals, crude valued at N516.82 billion, followed by Natural gas liquefied and Leather further prepared after tanning/crusting,incl. parchment-dressed leather of sheep/lam valued at N26.66billion and (N2.13billion) respectively.

On the other hand, the value of import trade from India was valued at N506.00 billion, accounting for 8.54% of total imports. The import trade was dominated by imported motorcycles and cycles, imported CKD by established manufacturers >50cc<=250cc, valued at N87.95 billion, followed by Gas Oil (N55.97 billion) and Other Antibiotics (N40.30billion). 

SPAIN

The value of total exports to Spain stood at N313.38billion or 9.81% of total export. The dominant export product was Petroleum oils and oils obtained from bituminous minerals, crude valued at N243.02billion accounting for 77.54% of total export.

This was followed by Natural liquefied gas worth N63.81 billion and Leather further prepared after tanning/crusting without wool on goats or kids valued at N3.02 billion. However, the value of imports during the quarter stood at N84.90billion.

Motor Spirit ordinary billion ranked at the top of imports, valued at N29.05billion, followed by Mixed alkylbenzenes & mixed alkyl naphthalenes, valued at N15.74billion and Gypsum; anhydrite whether or not coloured, with/without small quantities of accelerators, worth N5.61billion. 

THE NETHERLANDS

Nigeria’s export trade with the Netherlands in Q4 2020 was valued at N194.50 billion or 6.09% of total exports. Major export products were: Petroleum oils and oils obtained from bituminous minerals, crude valued at N190.74 billion, followed by Superior quality raw cocoa beans, and Good Fermented Nigerian Cocoa Beans valued at N1.93 billion and N1.38 billion respectively.

However, the value of imports stood at N424.49, with the main commodities imported being Motor Spirit ordinary, which amounted to N165.50 billion, Other Antibiotics (N108.78billion) and Gas oils (N47.12 billion).

THE UNITED STATES

In Q4 2020, Nigeria’s export trade with the United States was valued at N170.36 billion accounting for 5.33% of total exports. The major commodities exported during the period were Petroleum oils and oils obtained from bituminous minerals, crude; Other petroleum gases etc in a gaseous state and Natural gas, liquefied, valued at N142.60 billion, N22.92 billion and N2.58 billion respectively.

On the import side, the value of imports amounted to N448.64billion, with the main commodities imported being Used Vehicles, with diesel or semidiesel engine, of cylinder capacity >2500cc, amounting to N155.13billion. Other products imported were Other Durum wheat (Not in seeds) (N54.61 billion) and Used Vehicles, with diesel or semidiesel engine, of cylinder capacity >1500=<2500c (N 35.12 billion).

CHINA 

Exports to China were valued at N156.78billion or 4.91% of total exports during the period. This was largely dominated by Crude (N57.5billion), Natural Gas liquefied (N45.83billion) and Sesamum seeds, whether or not broken (N18.13billion). On the other hand, the value of imports from China stood at N1,675.55 billion representing 28.28% of total imports.

The largest import commodity from China was Machines 4 the reception, conversion & transmission or regeneration of voice, images or…; Bending, folding… machines (incl. presses), numerically controlled; and Air conditioning machine, Window/wall types, self-contained/split system, presented CKD valued at N53.13 billion, N41.08billion and N35.14 billion respectively.

COVID-19 Wipes Off ₦1.1Bn In Profits For Cadbury Nigeria

GTI
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COVID-19 Wipes Off ₦1.1Bn In Profits For Cadbury Nigeria

Cadbury Nigeria Plc, a major player in the Nigeria Consumer goods sector released its Audited Financial Statement for the year ended 31st December 2020 on the 30th of March 2021.

Cadbury Nigeria’s Profit-Before-Tax (PBT) and Profit-After-Tax (PAT) declined by 73% and 13% to ₦408.07 million and ₦931.83 million respectively, as against ₦1.54 billion and ₦1.07 billion in the corresponding period of 2019. The large difference between the PBT and PAT was driven by the claim of their deferred tax from 2019, which led to a major Income tax credit.

Earnings Analysis:

  • Due to the effect of Covid-19 pandemic lockdown, the Company’s Revenue for Full Year 2020 declined by 10% to ₦35.41 billion compared to ₦39.33 billion in FY’2019. This was due to a decrease of 6% and 36% in Domestic sales and Export sales to ₦32.29 billion and ₦3.11 billion respectively in FY’2020.
  • On the other hand, Cadbury Nigeria reported a 24% jump in Other Income to ₦108.04 million, as against ₦87.13 million in the corresponding Year of 2019, which was triggered by the sale of by-products and a 638% gain on the Disposal of PPE.

Cadbury Nigeria - Lockdown Easing Drive Q3’2020 Earnings Recovery

  • The Cost of Sales decreased slightly by 5% (from ₦31.00 billion to ₦29.51 billion). This was jointly driven by a 41% decrease in Advertising and Sales promotion, a 12% decrease in Selling and distribution expenses, and a 36% decrease in administrative expenses compared to the corresponding year of 2019.
  • Also, the Finance Income shrunk by 31% to ₦127.44 million, from ₦185.27 million compared to the previous year, while the Finance Cost grew by 6% to ₦1.20 million, from ₦1.14 million. This was attributed to a 31% decrease in Interest income on bank deposit and a 6% increase in Interest expense on leases.
  • As a result of the weak Revenue and high Finance Cost, in FY’2020, the company’s Profit-Before-Tax (PBT) and Profit-After-Tax (PAT) declined by 73% and 13% to ₦408.07 million and ₦931.83 million respectively, as against ₦1.54 billion and ₦1.07 billion in the corresponding period of 2019. The large difference between the PBT and PAT was driven by the claim of their deferred tax from 2019, which led to a major Income tax credit.
  • Consequently, the Earnings Per Share (EPS), settled at 50kobo per share; representing a 12% decrease compared to 57kobo in FY’2019.while a dividend of ₦0.49 was declared to the shareholders of the company.
  • The dividend per ordinary share of 49kobo was declared to the shareholders of the Company, amounting to ₦912.00 million compared to a dividend of 25kobo (₦471.00 million) the previous year. We believe the 98% declaration of EPS as a dividend is to retain investors’ confidence in the company.
  • Nevertheless, the Book Value Per Share (BVPS) of the Company dropped by 1kobo to settle at ₦7.21 compared to ₦7.22 in FY’2019 due to the 0.12% reduction in Total Shareholders Fund to ₦13.55 billion, from ₦13.57 billion in FY’2019.
  • Cadbury Nigeria Plc has a 99.66% stake in Cadbury Nigeria Plc Cocoa Processing Plant which sources cocoa powder for the manufacturing of Cadbury Bournvita. Mondelez International has a majority equity interest of 74.97% in Cadbury Nigeria Plc through its holding in Cadbury Schweppes Overseas Limited. The remaining 25.03% equity ownership is held by a diverse group of Nigerian individuals and institutional shareholders. Cadbury Nigeria Plc’s head office is in Lagos, Nigeria.

Liquidity Ratio printed strongly

  • The Company’s Liquidity ratio – Cash Ratio rose by 71% in the Year to 0.77 compared to 0.45 in the corresponding Year of 2019. This was aided by a 151% increase in cash and cash equivalents; a 123% increase in Bank balances and a 193% increase in Call deposits.

Conclusion

  • CADBURY closing share price on 31/3/2021 was ₦8.25 settling above it BVPS ₦7.21, we maintained a HOLD recommendation on the stock.

Cadbury Nigeria Plc manufactures and markets a range of chocolate malt drink mixes, sweets, powder beverages and chewing gums in Nigeria. The company was established in the 1950s to source cocoa beans from Nigeria for the Cadbury Group; it then branched into re-packing imported bulk products and grew rapidly into a fully-fledged manufacturing operation producing a range of popular Cadbury brands.

Cadbury Bournvita is the company’s flagship product which is a brand of malted and chocolate malt drink mixes that has energy and nutritional properties.

The company introduced other Cadbury brands into its range in the 1970s; TomTom, a large black and white sweet for soothing relief; Cadbury Buttermilk, a delicious sweet with butter and mint flavour; Tang, a popular powdered beverage; and Clorets and Trident, brands of chewing gum.

FCMB: Defying The Odds, FX Devaluation Supports Interest Income

Meristem
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FCMB: Defying The Odds, FX Devaluation Supports Interest Income

FCMB Group Plc. was able to sustain gross earnings growth (+10.04% YoY to NGN199.44bn) in 2020FY supported by both interest income and non-interest income.

Interest income was mainly driven by the 12.16% YoY improvement in interest on customer loans, as well as 12.27% YoY rise in income on investment securities, which jointly constitute over 90% of total interest income.

The sharp growth in interest income came as a surprise but Management attributed it to translation gains arising from the impact of FX devaluation on interest from dollar instruments, as well as interest income from investment securities bought in 2019FY (while interest rates were relatively higher).

The major drivers of non-interest income were fees-related income from increased customer usage of digital banking channels, and gains from revaluation of USD-denominated assets due to Naira devaluation during the year. In 2021FY, the bank’s digitalization of SME lending should support loan growth which will ultimately bode well for interest income. And while Management has not provided guidance on the possibility of loan repricing, we do expect that interest income will at least benefit from the uptick in the yield environment.

We do not anticipate that FX gains will be as significant in 2021, a view shared by Management. Furthermore, trading gains are expected to moderate on the back of rising yield investment securities.

Improved Profitability Despite Inflationary and Impairment Pressures

Notwithstanding the +29.57% YoY growth in interest-bearing liabilities, the group’s cost of fund dipped by 112bps YoY, attributable to the regulatory reduction of interest rate on savings deposits and increase in low-cost deposits to 77.79% of total customer deposits (vs. 69.79% in 2019FY). Asset yield also improved to 11.65% (vs 10.41% in 2019FY) due to factors cited earlier. Hence, Net Interest Margin (NIM) rose by 149.00bps YoY to 8.10%. Elsewhere, while operating expenses increased by +9.68%YoY (on the back of inflationary pressures, IT-related expenses, regulatory overheads, and COVID-19 donations), the cost-to-income ratio (CIR) improved by 381.28bps on account of +16.06% YoY acceleration in operating income. Consequently, Profit After Tax grew by +13.11% YoY to NGN19.61bn, despite the sharp uptick (+62.27% YoY) in impairment charges (resulting from the volatile business environment in 2020FY). The continued accumulation of cheaper funding should further suppress cost of funds. This, together with the uptrend in investment yield, is expected to support NIM growth. Also, we expect relatively modest impairment charges in 2021 owing to an improved business environment. Therefore, we project an 8.08% YoY growth in Profit After Tax (to NGN21.19bn) in 2021FY.

Asset Quality Resilient Despite Higher Default Risks

FCMB’s gross loan book expanded by 15.23% YoY to NGN869.28bn in 2020FY, 29.60% of which was triggered by Naira devaluation during the year. Management explained that the devaluation, coupled with past-due obligations from an oil and gas loan led to 3.40% increase in the group’s Non-Performing Loans (NPL). Nonetheless, we observed an overall improvement in asset quality as the NPL ratio declined to 3.29% from 3.67% in 2019FY. Other prudential ratios are comfortably above the regulatory minimum.

Recommendation

We forecast a 2021FY EPS of NGN1.06. Combining this with our target PE of 2.71x, we obtain a 2021FY target price of NGN2.88, implying a 0.46% downside potential based on its closing price on April 8,2021. Thus, we recommend a HOLD on the ticker

UACN: Bracing For Growth Through Restructuring

Meristem
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UACN: Bracing For Growth Through Restructuring

… As Animal Feed Segment Remains Major Contributor To Topline Growth

In its recently concluded 2020FY, the United Africa Company of Nigeria (UACN) reported a slowdown in revenue growth, posting an increase of 2.72%YoY to NGN81.35bn (vs. 2019FY: NGN79.20bn).

While three of the firm’s four product divisions witnessed improvement in revenue despite the challenging macroeconomic environment, the UACN’s overall performance lagged that of 2019FY (where revenue grew by strong double digits: 12.39% YoY).

The Animal Feed and Other Edibles division, which accounts for the bulk of total revenue (c. 60%), witnessed a 5.22% uptick, influenced by a combination of higher volumes and higher product prices. On the other hand, the Packaged Food and Beverages segment (+1.52%), and Quick Service Restaurant (+1.77%) both recorded sluggish revenue growths, while revenue from the paints segment declined (-6.14%). For the latter, its weak performance was due largely to a significant decline in demand during the pandemic-induced lockdown.

To expand its capacity and create room to maximize economies of scale, Management announced its intention to merge CAP and Portland Paints making the new combined entity the largest player in Nigeria’s Paints Industry. Similarly, we note UACN Management’s renewed efforts at growing its QSR business division – by opening up new stores and investing in its distribution network. For 2021FY, we expect topline performance to be driven by the firm’s expansion initiatives and the improvement in its distribution networks. Hence, we project a 2021FY revenue of NGN84.20bn (growth rate of 3.49% compared to 2020FY).

Production Costs Maintain Upward Trend

Cost to sales rose slightly from 79.01% in 2019FY to 80.35% in 2020FY, driving gross margin down to 19.65% (from 2019FY: 20.99%). Operating profit declined by 36.52%, on the back of a significantly high base year figure (profit from the sale of investment property & PPE) resulting in an operating margin of 4.42% from 7.15% in 2019FY. UACN recorded a decline in finance cost following the repayment of a portion of its debts and the restructuring of UPDC. Ultimately, the combination of slow growth in topline and significant cost pressures resulted in a 35.30% contraction in bottom-line, from NGN5.34bn to NGN3.46bn. However, the recognition of profit from discontinued operation bolstered overall earnings by 142.43% to NGN3.92bn, a significant improvement on the NGN9.25bn loss recorded in 2019FY. The firm’s restructuring efforts so far is expected to bode well on earnings as the finance cost pressure from UPDC eases and it realizes the benefit of economies of scale from consolidating its position in the paints market. Against this backdrop, we project a net margin of 5.80% and an implied EPS of NGN1.70 vs. NGN1.20 in 2020FY.

UPDC Restructuring Improves Earnings Position

In 2020FY, UAC’s 51% interest in UPDC worth NGN6.59bn was divested to Custodian Investment Plc. Also, UACN 24.34% interest in UPDC Real Estate Investment Trust (649 million units valued at NGN3.6bn) was unbundled to UACN shareholders. UPDC previously accounted for the largest portion of UACN’s borrowings and the divestment from the business further strengthened earnings (lower finance cost) in 2020FY and we expect this to continue into 2021FY.

 Recommendation

Premised on an Expected EPS of NGN1.70 and a Target P/E ratio of 5.87x, we arrived at a 2021FY target price of NGN10.00. This represents an upside potential of 2.56% from its current price of NGN9.75 (as at 7th April 2021). Hence, we recommend a HOLD on the counter.

Global Food Prices Rise For 10th Month In A Row – FAO

Esan Bolaji
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0
Global Food Prices Rise For 10th Month In A Row – FAO

Vegetable oils drive FAO Food Prices Index higher in March while cereal quotations dip

Global food commodity prices rose in March, marking their tenth consecutive monthly increase, with quotations for vegetable oils and dairy products leading the rise, the Food and Agriculture Organization of the United Nations (FAO) reported today.

The FAO Food Price Index, which tracks monthly changes in the international prices of commonly-traded food commodities, averaged 118.5 points in March, 2.1 percent higher than in February and reaching its highest level since June 2014.

World food prices rise for 7th month in a row in December

Trends varied by commodity types. The March increase was led by the FAO Vegetable Oil Price Index, which rose 8.0 percent from the previous month to hit a nearly 10-year high, with soy oil prices rising sharply due in part to the prospects of firm demand from the biodiesel sector.

The FAO Dairy Price Index increased 3.9 percent from February, with butter prices buoyed by somewhat tight supplies in Europe associated with increased demand in anticipation of a food-service sector recovery. Milk powder prices also rose, supported by a surge in imports in Asia, particularly China, due to declining production in Oceania and scarce shipping container availability in Europe and North America.

The FAO Meat Price Index also rose, by 2.3 percent from February, with imports by China and a surge in internal sales in Europe ahead of the Easter holiday celebration underpinning increasing poultry and pig meat quotations. Bovine meat prices remained steady, while ovine meat prices declined as dry weather in New Zealand led to farmers offloading animals.

By contrast, the FAO Cereal Price Index dropped by 1.8 percent, but it is still 26.5 percent higher than in March 2020. Wheat export prices declined the most, reflecting generally good supplies and favourable production prospects for 2021 crops. Maize and rice prices also declined, while those for sorghum rose.

The FAO Sugar Price Index declined 4.0 percent in the month, triggered by prospects of large exports from India, but it remained more than 30 percent above its year-earlier level.

Positive cereal crop prospects in 2021

FAO expects world cereal production in 2021 to increase for the third consecutive year and has raised its preliminary global wheat production forecast on better than-earlier-anticipated crop conditions in several countries.

Global wheat production is forecast to reach a new high of 785 million tonnes in 2021, up 1.4 percent from 2020, driven by a likely sharp rebound across most of Europe and expectations of a record harvest in India.

Above-average outputs are also expected for maize, with a record harvest anticipated in Brazil and a multi-year high in South Africa, according to FAO’s Cereal Supply and Demand Brief, also released today.

For the current 2020/21 marketing season, global cereal utilization is now forecast at 2 777 million tonnes, 2.4 percent higher than the previous year, driven largely by higher estimates of feed use of wheat and barley in China, where the livestock sector is recovering from African swine fever.

World cereal stocks at the end of 2021 are forecast to decline by 1.7 percent from their opening levels to 808 million tonnes. Combined with the utilization forecasts, the global cereal stock-to-use ratio for 2020/21 is foreseen to dip to a seven-year low of 28.4 percent.

FAO also raised its forecast for world trade in cereals during 2020/21 to 466 million tonnes, a 5.8 percent increase from the previous year, driven by even faster trade in coarse grains linked to unprecedented levels of maize purchases by China. Also for rice, international trade is forecast to expand by 6 percent year-on-year.

The Brief offers more details and updated assessments.

Facial Recognition for Payments Authentication to Be Used by Over 1.4 Billion People Globally by 2025

Esan Bolaji
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0
Facial Recognition for Payments Authentication to Be Used by Over 1.4 Billion People Globally by 2025

Growth Driven by Software-based Capabilities & FaceID

12th April 2021: A new study from Juniper Research has found that the number of users of software-based facial recognition to secure payments will exceed 1.4 billion globally by 2025, from just 671 million in 2020. This rapid growth of 120% demonstrates how widespread facial recognition has become; fuelled by its low barriers to entry, a front-facing camera and appropriate software.

Facial Recognition for Payments Authentication to Be Used by Over 1.4 Billion People Globally by 2025 Brandspurng
Photo by Patrick Tomasso

The research identified the implementation of FaceID by Apple as accelerating the growth of the wider facial recognition market, despite the challenges to facial recognition during the pandemic with face mask use.

The research recommends that facial recognition vendors implement robust and rapidly evolving AI-based verification checks to ensure the validity of user identity, or risk losing user trust in the authentication method as spoofing attempts increase.

Fingerprint Sensors Dominant, Hardware-based Facial Recognition Growing

The new research, Mobile Payment Authentication: Biometrics, Regulation & Market Forecasts 2021-2025, found that fingerprint sensors will feature on 93% of biometrically equipped smartphones in 2025. This compares favourably to hardware-based facial recognition, with just 17% of biometrically equipped smartphones featuring these capabilities in 2025.

Research co-author Susan Morrow explains:

‘Hardware-based facial recognition is growing, but the ability to carry out facial recognition via software is limiting its adoption rate. As the need for a secure mobile authentication environment grows, smartphone vendors will need to increasingly turn to more robust hardware-based systems to keep pace with fraudsters’ evolving tactics.’

Voice Recognition for Payments Growing, but Limited in Scope

The research also found that the use of voice recognition for payments is increasing, from 111 million users in 2020 to over 704 million in 2025. The report identified that, at present, voice recognition is mostly used in banking, and will struggle to grow beyond this, due to concerns around robustness.

Juniper Research recommends that vendors adopt a multi-method biometric strategy, which encompasses facial recognition, fingerprints, voice and behavioural indicators to ensure a secure payment environment.

Juniper Research provides research and analytical services to the global hi-tech communications sector; providing consultancy, analyst reports and industry commentary.

May & Baker: Creating Value In Troubled Times; Pharmaceutical Division Anchors Topline Growth

Meristem
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0
May & Baker: Creating Value In Troubled Times; Pharmaceutical Division Anchors Topline Growth

May & Baker experienced a turning point in 2020FY, following two consecutive years of revenue contractions. Topline expanded in double digits, up by 16.21% YoY to NGN9.39bn, fueled by the 16.46% growth in revenue from the pharmaceutical division (NGN9.32bn from NGN8.00bn in 2019FY).

An increase in health consciousness amongst the populace considering the COVID-19 pandemic, coupled with the associated rise in the demand for drugs and other pharmaceutical products, contributed to the positive performance recorded by the firm during the year. On the contrary, the pandemic-induced constraints on distribution chains suppressed revenue from the firm’s beverage division- Lily Water. Revenue from this unit shrank by 9.64% to NGN69.74mn from NGN77.18mn in 2019FY.

Going forward, we expect the uptick in the firm’s demand to be sustained and supported by the essential nature of the firm’s products and the improving level of health consciousness amongst the populace. Waning consumer wallets and competitive pressures, however, pose a downside risk to our optimistic revenue projection (up by 14.50% to NGN10.75bn.

Profitability Metrics Unfettered By Increased Cost Pressure

Production cost expanded by 8.38% to NGN5.61bn (vs. NGN5.17bn in 2019FY), particularly influenced by the increase in raw materials costs (+4.60%) and direct expenses (+63.63%).

The double-digit revenue growth (+16.21%) provided support to margins, resulting in a decline in cost-to-sales ratio to 59.73% from 64.04% in the corresponding period last year. The cost-to-sales ratio is also significantly lower than its five-year average (64.73%), implying improved cost efficiency.

On this note, gross margin widened to 40.27% from 35.96% in 2019FY whilst operating margin improved to 14.99% from 12.48% in 2019FY. There was a notable increase of 46.56% in finance cost to NGN228.80bn, influenced by additional debt facilities booked during the year. The firm’s debt profile expanded to NGN4.15bn on the back of the NGN3.50bn intervention loan obtained to finance proposed capital projects and augment working capital. Interest coverage ratio dipped slightly to 6.15x from 6.46x in 2019FY, a result of the increase in finance cost.

Overall, profit for the year improved by 34.69% in 2020FY to NGN964.56mn, implying a higher net margin of 10.27% from 8.86% in 2019FY. In the absence of a significant disruption to supply chains, we expect costs to hover around current levels inching up slightly in response to inflation, resulting in a cost-to-sales ratio of 58% and a net margin of 8.75% in 2021FY.

Capital Restructuring Improves Liquidity

Position The NGN3.50bn intervention loan obtained from the CBN in 2020 is divided into an NGN1.00bn with a tenor of 5 years (moratorium period of 6 months) and a NGN2.5bn with a tenor of 10 years (moratorium period of 1 year).

This debt injection also improved the company’s liquidity position with quick and cash ratios improving to 1.77x and 1.04x from 1.09x and 0.23x in 2019FY.

 Recommendation

We project a 2021FY expected EPS of NGN0.55 and a target PE of 7.50x. This yields a price target of NGN4.09, and an implied 2.66% downside potential based on the closing price on April 6 th2021. Hence, we rate the ticker a HOLD.

 

Rite Foods Excites Sports Enthusiasts at Elegushi Peace Cup Tournament in Lagos

Esan Bolaji
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Rite Foods Excites Sports Enthusiasts at Elegushi Peace Cup Tournament in Lagos

Rite Foods Limited, a truly world-class and proudly Nigerian foods and beverages company, Friday, dazzled fans of celebrities, sports lovers, guests and Lagos residents as it threw its weight behind the 11:45 edition of the Elegushi Peace Cup, which kept fans, spectators and guests in excitement.

Rite Foods Excites Sports Enthusiasts at Elegushi Peace Cup Tournament in Lagos Brandspurng1
(R-L): Photo shows His Royal Majesty, HRM, Oba Saheed Ademola Elegushi (Kusenla III), the Elegushi of Ikateland, in a handshake with ex-super eagles midfielder and captain, Austin Jay Jay Okocha at the Elegushi Peace Cup tournament in Lagos, sponsored by Fearless Energy drink, a product of Rite Foods Limited | Brand Spur Nigeria

The Elegushi Peace Cup was characterized by celebrity football matches at the Campus Mini Stadium, Lagos Island, to commemorate the 11th coronation anniversary and 45th birthday celebration of His Royal Majesty, Alaiyeluwa, Oba Saheed Ademola Elegushi (Kusenla III), the Elegushi of Ikateland, who also flagged-off the tournament.

Rite Foods Excites Sports Enthusiasts at Elegushi Peace Cup Tournament in Lagos
Photo shows His Royal Majesty, HRM, Oba Saheed Ademola Elegushi (Kusenla III), the Elegushi of Ikateland (middle) with players of team music at the Elegushi Peace Cup tournament in Lagos, sponsored by Fearless Energy drink, a product of Rite Foods Limited. | Brand Spur Nigeria

According to Oba Saheed Elegushi, the vision of the Elegushi Peace Cup is to promote peace and unity through passion. It is His Royal Majesty’s belief that for peace to reign in Nigeria, every stakeholder must rise up at this critical period with good initiatives that will complement the existing efforts by the various arms of government, and that ‘the traditional institution, as the custodians of the nation’s history and heritage must be supported to lead this new drive.’

“While the ‘Elegushi Peace Cup is the project, the Legends for Peace is the platform,” he said.

In her remark, the Assistant Brand Manager, Rite Foods Limited, Bolu Adedugbe, stated that the company is committed to promoting the cultural values and heritage of the people as well as youth and sports development by creating valuable experiences through such platforms, hence, it has decided to celebrate with the Oba who is keenly interested in youth and sports development.

“Elegushi Peace Cup created the platform for us to emotionally connect with our consumers and actively engage in community development to encourage sports and promote peace. The Fearless energy drinks brand being the frontline sponsor shows the brand is on the right platform as it has created its desired experience for consumers,” she stated.

She further congratulated the Oba for being a pillar of support for youths by championing causes to promote peace and unity.

It was an exciting experience for all as four teams which comprised team Nollywood, team Music, team Comedy and team Soccer, played a novelty tournament to promote peace and unity among Nigerians, especially the youths.

Team Nollywood players were top actors and filmmakers in the movie industry like AY, Fred Amata, IK Ogbonna, Rykardo Agbor amongst others. The music team comprised performing music stars and music makers like Zlatan, TG Omori, Praiz, Spyz etc.

Ex-super Eagles stars like Jay-Jay Okocha, Kanu Nwankwo, Daniel Amokachi, Ikpeba, Garba Lawal made up team soccer while team comedy includes top comedians like Akpororo, I go Save, Maleke, AY etc.

In the tournament, Team Nollywood emerged winners, thus clinching the trophy, with the next edition dubbed 12:46.

The ‘Fearless’ Energy brand as well as other Rite Foods products were readily available to keep all players, guests and fans refreshed and energized for the occasion that was spiced up by entertaining moments of football played by A-list celebrities and ex-international award-winning players, leaving fans clamouring for more enjoyment already created by the Rite Foods brand.

Mixed Sentiment Prevailed on Global Shares to Begin Q2’21

GTI
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Mixed Sentiment Prevailed on Global Shares to Begin Q2’21

This week, buying interest dominated in eight (8) of the fourteen (14) stock markets under our coverage despite the hiccups in the effectiveness of the Covid-19 vaccine and rising bond yields.

Consequently, all of the three broadest market indices in the U.S the DJIA Index, S&P 500 and Nasdaq Composite Index all grew by 1.95% w/w, 2.71% w/w and 3.12% w/w respectively, amid fear of spike in inflation could force the Federal Reserve to raise inflation rates sooner.

Mixed Sentiment Prevailed on Global Shares to Begin Q2’21

Similarly, the major market around Europe France CAC 40, UK FTSE 100 and German DAX gained 1.09% w/w, 2.65% w/w, and 0.84% w/w respectively.

However, major Asian market indices, the Japan Nikkei 225, Honk-Kong HANG SENG, China Shanghai Composite Index and India S&P BSE declined by 0.29%w/w, 0.83%w/w, 0.97% and 0.88%w/w respectively.

Mixed sentiment reigned across the emerging markets under our coverage, Brazil’s BOVESPA and Argentina’s MERVAL Index gained 2.10%w/w and 1.80%w/w respectively, while the Egypt EGX 30 and South-Africa FTSE/JSE Index that lost 2.47%w/w and 0.07%w/w respectively.

We expect to see some further positive reaction from investors in the next trading week in reaction to U.S infrastructural plan amidst Covid-19 vaccination and concerns about the continued rise in inflation.

Despite Three Days Gain, Equity Market Shrunk 0.13% W/W

GTI
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Despite Three Days Gain, Equity Market Shrunk 0.13% W/W

Transactions on the Nigerian Equity Market closed w/w on a negative note despite the market recorded gains in three out of the four trading sessions in the week. The decline was a result of the significant dip of 0.39% on the early day of the week.

Despite Three Days Gain, Equity Market Shrunk 0.13% W/W

Consequently, the Market Indicators (NSE-ASI and NSE Market Capitalization) decreased by 0.13% w/w to close for the week at 38,866.39 absolute points and N20.34 trillion compared to 38,916.74 absolute points and N20.36 trillion last Thursday. This nominally translates to a week-on-week loss of N26.33 billion in Market Capitalization value.

Of the five major sectors, only the Consumer Goods sector closed positively with a percentage increase of 1.12%, while the other four major sectors closed negatively for the week, which includes, the Banking sector, Insurance sector, Industrial sector and Oil and Gas sector, with percentage decrease of 2.25%, 1.49%, 0.66% and 0.31% respectively.

Despite Three Days Gain, Equity Market Shrunk 0.13% W/W

JAPAULGOLD emerged best performing stock for the week with a w/w gain of 40.00%, while GUINNESS shed 17.27% to emerge as the top loser.

A total turnover of 887.04 million shares worth N9.19 billion in 17,837 deals was traded this week by investors on the floor of the Nigerian Stock Exchange as against a total of 1.45 billion shares worth N19.04 billion in 17,400 deals.

Seventeen (17) equities appreciated at price during the week, lower than forty-two (42) equities in the previous week. Forty (40) equities depreciated in a price higher than twenty-two (22) equities in the previous week, while one hundred and five (105) equities remained unchanged, higher than ninety-eight (98) equities recorded in the previous week

Outlook

We expect mixed sentiment from investors in the coming week, amid profit-taking from recently appreciated stocks and low valued stocks in the market.

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