I always advise my analyst at Nimed Capital search for opportunities, regardless of the economic circumstances. The economy sometimes operates as a zero sum game, where the decline of wealth in a particular sector inadvertently leads to the rise of wealth in another sector. For example, persistent power outages led to a rise in sales for gasoline and a booming business for generator sellers in Ghana. Another example is the near demise of internet cafés in Ghana from the sudden rise of smart phones and Mifi’s. So there is always an opportunity.
Today’s article will focus on how one company created almost 372.03% return for its shareholders in Ghana within a period of four years, between the years of 2012-2016. Interestingly, the economic performance, within that same period, experienced a year on year decline which eroded disposable income and consequently dented consumer spending. These are factors which should have eroded prospects for the company. However, Fanmilk (FML) started the year 2012 with a trading price of GHC2.36 and by year end 2016 was trading for GHC 11.14, representing a rise of almost 372.03% for the period under review.
The cause of this spectacular performance of FML for the period between 2012-2016 owes to a number of factors with the salient ones being fanmilk’s increase in its distribution network. Fanmilk, aggressively increased its distribution and supply network by investing heavily in push charts, depots and refrigerated buses. In addition to that world prices for fanmilk’s input, materials/commodities such as dairy milk, sugar and additives declined consistently, boosting the company’s profitability.
All these factors made it possible for the company to increase its sales while reducing its cost in a declining economy.
Remember that before you invest, you should seek expert advice.