High cost of financing, distribution and operations have combined to drive down the profits of
If the popularity of products and name is what determines the financial performance of a company,
A look at the refrigerator or the bathroom shelf, one is bound to see at least one of the company's brands.
However, looking at the performance of the company in 2013 and first quarter of 2014, the brand equity, popular products and others have not really yielded the expected results as the company battles with high operating costs to remain afloat.
After series of mergers/acquisitions, the company diversified into manufacturing and marketing of foods, non-soapy detergents and personal care products. These mergers/acquisitions brought in
The shares of the company are held 50.04 per cent by the parent firm,
The global brands in the kitty of
In the Food Business Unit, brands like Blue Band Margarine,
Success Factors Although the company is 91 years old, it has remained successful.
This enables it to create products that help them to 'feel good, look good and get more out of life' and the total commitment to exceptional standards of performance and productivity.
"In order to sustain this success, we endeavour to maintain the highest standards of corporate behaviour towards our employees, consumers, customers, communities and operating environment.
"Our brands are household favourites and this is because we are so deeply committed to meet the everyday needs of people everywhere in
2013 Operating Environment Like other manufacturing companies,
Over the years, these had remained a major concern to manufacturing companies. Power generation continues to affect production negatively as it increase the cost on the part of manufacturers and at the same time putting pressure on consumer's disposable income.
Equally, the challenge is heightened by high cost of distribution of goods and logistical operations due to the poor states of interstate roads. Unfortunately, other source of transportation like waterway and railway remains untapped or abandoned.
Meanwhile, the security situation in certain parts of the country equally affected the performance of companies,
Financial performance The challenges in the operating environment affected the performance of
All these impacted negatively on the bottom-line of the company.
But that growth was neutralised by 11 per cent increase in cost of sales, which grew from N33.9 billion to N37.55 billion in 2013.Distribution and administrative expenses witnessed a higher growth of 14 per cent, rising from N12 billion to N14.5 billion.
Finance charges jumped by 39 per cent from N816 million to N1.1 billion, showing the need for equity capital injection. In 2013,
As a result of the high finance charges, profit before tax (PBT) declined by 16 per cent from N8.18 billion to N6.91 billion. The company tried to improve on the bottom-line the reducing tax by 19 per cent from N2.58 billion to N2.104 billion. Despite that, the profit after tax fell by 14 per cent from N5.59 billion to N4.83 billion.
Based on the reduced profitability, earnings per share declined from N1.48 to N1.27. Also, the measure of the gain, which accrues to the owners of the company, known as return on equity dropped by 5.86 basis points in 2013 to 49.87 per cent from 55.73 per cent in the previous year.
Similarly, profit margin, the proportion of sales converted to distributable profit, declined by 2.07 basis points to 8.01 per cent from 10.08 per cent in the previous year. Out of the N1.48 EPS, the directors decided to distribute N1.25 as dividend per share.
While the 2013 financial year is gone,
Also, unlike 2013 when cost of sale rose, it decline five per cent in Q1 of 2014, to N8.5 billion, from N9.4 billion. However, distribution expenses remained a drain on the income of the company and still showing the poor state of infrastructure in the country. It rose by 32 per cent from N3.8 billion to N3.8 billion.
Similarly, the huge borrowings the company embarked upon in 2013, remains a drag on its bottom-line as finance charges increased by 30 per cent from N294 million to N381 million.
Consequently, PBT fell by 46 per cent from N2.02 billion to N1.08 billion. Again, the company tried to reduce the tax payment by 55 per cent this time, from N757 million to N339 million. That notwithstanding, PAT declined by 41 per cent from N1.26 billion to N750 million.
EPS for Q1 fell by 40 per cent from 33 kobo to 20 kobo. If this trend persists, the company may end up with an EPS of 80 kobo for the whole year.
A big task for management It is the belief of market operators that the management of
They are, however, confident that given the background of Nsarkoh, the company's declining fortunes may improve soon. Nsarkoh joined
He has served as Strategic Assistant to
He was said to have contributed immensely to the growth of
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