Union Dicon Salt: Swinging Along With The Tide


Tuesday, September 26, 2017 11:35AM / Proshare Research

The financial position and balance sheet of Union Dicon Salt Plc for the year ended 2016 was made public on Wednesday 5th September 2017.   In line with previous year, the company core revenue remained redundant. Concurrently, the firm bore no cost of sales expense as expected; it failed to incur any form of fixed cost for the 2016 horizon as it core revenue mobilizer remained redundant.

Revenue generated from its other sources of income stood at N471.1 million.  Reversal of provision earlier written off was responsible for 90% of revenue from other sources, therefore provision written back stood at N427 million at the end of 2016.

The void created by diversifying into the agricultural value chain has forced the company to hinge heavily on its ancillary income arm.  At the same time a large chunk of the firm’s ancillary income tend to be more of ‘Other Operating Income’ due to substantial contribution from roll back made to earlier provision in its financial statement.

Administrative expenses incurred by Union Dicon Salt under the period of review stood at N72.15 million. This is reflective of 12.2% fall in administrative cost compared on a year on year basis.  Profit before tax (PBT) stood at N398.96 million, which is a substantial buffering in the firms top line compared to the loss of N2.285 million incurred in the previous year of 2015.

Regardless, the firm’s revenue is mobilized from ancillary sources and by nature also prone to sudden deviation. Certainly, this is a dent on the quality of the firm’s existing bottom line; at the same time such dent stresses the uncertainty of financial health of the firm.

Union Dicon’s net profit at the end of the period stood at N388.03 million which puts the tax’s leverage at 0.97.  The share capital at the end of 2016 stood at   -N775million, compared to -N1,162 million in 2015.

Even though shareholders capital rose by 33% compared to the previous year, it still remains within the negative territory. More importantly records available pin point Union Dicon Salt Plc churning up negative shareholders capital for five horizons consecutively.

Fig 1: Union Dicon Salt

Source: Proshare Research

Union Dicon admitted in its 2016 Financial statements that it’s experiencing difficulty in maintaining a positive net capital position. Therefore it has diversified into agricultural sector, with the intent to harness the opportunity of profitability along the agribusiness value chain. Such move so far has failed to bolster revenue.

Obviously an incidence where a firm seem to have redundant core revenue coupled with a negative share capital does raise eyebrows. It doesn’t end at raising eyebrows alone, especially when such firm retains its identity as a publicly quoted company on the Nigeria stock exchange.

UDS announced through the Exchange that its 2016 Audited Financial Statements (AFS) was delayed due to the finalisation of its balance sheet restructuring exercise. Going forward, it is expected that the completion of the exercise will turn things around for the company and change the observations raised in this article.

We wrote the firm some weeks back and they acknowledged the concerns expressed by the research team, promising to get back to us. They are yet to do so. We will update our analysis when they do.

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