Can consumer goods sustain growth momentum in FY'23?

Analysts at Cardinalstones Securities are optimistic about the growth trajectory of the consumer goods sector, forecasting a 13 per cent year-on-year increase supported by sustained price hikes, sachet packaging, and deliberate export expansion. Olufisayo Ademilua, a Research Analyst at Cardinalstones Securities, provided valuable insights into the sector's performance and key players during a recent interview on CNBC Africa. In the interview, Ademilua discussed the earnings and market dynamics of companies in both the consumer goods and cement industries. The cement sector saw a boost in revenue due to lower volumes and higher prices, with companies like Wapco, Lafarge, and Dangote Cements leading the pack. However, lower gas supply impacted volumes. In contrast, consumer goods companies like Flower Mills and Nestle reported increased revenue from higher prices but also faced challenges like cost pressures and rising transportation costs. Flower Mills acquired Honeywell Flour Mills, expanding its market presence but also increasing its debts, leading to higher finance costs. On the other hand, Nestle maintained steady revenue growth and market leadership through product innovation. Ademilua highlighted the pricing strategies of companies, noting that industrial goods players could pass on costs to consumers due to lower competition. Consumer goods companies relied on market leadership to adjust prices accordingly. The analyst also discussed challenges faced by brewers like Guinness and Nigerian Breweries, such as foreign exchange pressures and higher FX losses due to currency depreciation. Expansion plans were in place for cement makers like Dangote Cements, Wapco, and Lafarge, focusing on West Africa and improving gas supplies. Ademilua emphasized the positive year-to-date performance of consumer goods, driven by key players like Barfoot and Dangote Sugar, with investors reacting positively to robust earnings. However, concerns over operating and finance cost pressures remain for the sector. In conclusion, the consumer goods sector is poised for sustainable growth in FY'23, driven by strategic pricing, product innovation, and expansion plans amid challenges in the operating environment.