Tuesday, March 29, 2016 1:15PM /Cordros Capital
Cement Company of Northern Nigeria Plc (CCNN) released its result for the financial year ended December 31, 2015 earlier today.
The full year result came in disappointing, following an extremely poor performance in the fourth quarter. Revenue and PAT respectively came in 13.8% and 37.4% less than full year 2014 figures. Compared to consensus estimates, 12 months revenue, EBIT and PAT were lower by 10%, 27% and 38% respectively. The Board proposed a final dividend of 10kobo/share (vs. 35 kobo/share in 2014), yielding 1.2% on Thursday's (last week) closing price.
In the fourth quarter, revenue fell by 46% y/y (44.4% q/q) while a loss after tax of N446.6 million was reported. We attribute the decline in revenue to a mix of low sales volume and prices. On pricing, whilst acknowledging that CCNN enjoys some sort of monopoly in Sokoto and its neighbouring states, we believe the 18% price cut by the industry leader in September may have adversely impacted revenue over Q4.
With regards volume, while taking note of external challenges associated with insecurity and fuel (PMS) supply challenges (which impact on both the operations of the company and its customers), we reiterate our views on the shortcomings associated with the old age of CCNN's existing plants -- and their vulnerability to intermittent periods of lost productions due to repairs.
Cost of sales was down 4.1% y/y. However, considering weak pricing and the impact on sales revenue, COS margin surged by almost 6000bps y/y to 135.8%, resulting in a gross loss of N550.5 million. Both the gross loss, and reduced other income (-55.4% y/y) more than offset 82.3% y/y decrease in operating expenses. EBIT thus fell by 635.4% y/y.
Loss before tax was N873.4 million during the period, compared to N67 million loss in Q4-2014. There was a tax rebate of N426.8 million, 67% higher than that granted in same period of 2014.Initial Impression of the Result - Negative