Tuesday 17 November, 2015, 03:13PM /DLM Research
Nascon Allied Industries Plc recently released its 9-month unaudited results to September 2015. The results show an improvement in revenues to
N10.19billion, up by 24.71% from N8.17billion recorded in the corresponding period of 2014.
We are also inclined to highlight that, on a q/q basis, revenue for Q3 declined by 3.75% to
N3.59billion from N3.73billion in 2Q2015. However on a year-on-year basis, we note the significant improvement in revenues from N2.79billion in 3Q2014 – which we attribute to the growing market awareness of the new product - ‘DANQ Seasoning’ which supported the company’s performance.
Whilst we are of the opinion that the growth outlook for the company remains positive particularly in view of its current diversification plan, the tough operating environment and rising cost remain key risks.
Given that the company’s major customers are leading blue chip companies, the weakened economic fundamentals and its negative spill-over effect on businesses remains a huge risk to revenue growth in the short to medium term.
We observed the rising cost of sales driven largely by the naira depreciation and the foreign exchange administrative measures adopted by the Central Bank of Nigeria – particularly as the company imports a significant portion of its raw materials.
In our view, the company’s profitability going forward will be largely dependent on its ability to aggressively penetrate selected markets, implement efficient cost management techniques and increase sales volumes significantly.
Operating and post-tax profit for 9M2015 came in at N2.39billion and N1.62billion respectively. COS rose by 33.93% y/y to N6.95billion in 9M2015 compared with N5.19billion in 9M2014 resulting in a gross profit of N3.24billion during the period.
On a q/q basis, gross profit increased by 2.45% to N1.17billion in 3Q2015. The operating profit recorded during the period is 2.73% higher than N2.33billion posted in 9M2014. In addition, post-tax profit improved by 2.83% from N1.57Billion in 9M2014.
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