Seven UP reports net income of N2.2 billion

For the first nine months through December 2015, Seven Up Bottling Company Plc reported net income of N2.23 billion as against N4.54 billion the previous year.

Sales increased by 0.65 percent to N60.22 billion as the company’s top lines got dampened by slow consumer spending.

The spiralling cost of production for companies in Africa’s largest economy combined with huge finance costs also ate into Seven Up’s profits.

The company’s profit took a hit from a 13.40 percent rise in cost of sales to N42.12 billion, compared with N37.14 billion in 2014.

The soft drink company’s cost of sales ratio increased to 70 percent in the period under review from N62.07 billion the previous year.

This means Seven Up spent N70 on input costs to produce each unit of products. Net margin, a measure of profitability and efficiency reduced to 3.70 percent compared with 7.58 percent in 2014.

The huge production costs also affected direct costs attributable to projects as gross profit fell by 22.75 percent to N30.05 billion in 2015 from 38.90 billion in 2014. Gross profits margin were down to 50 percent in 2015 compared with 65.17 percent the previous year.

Despite the flattish sales, analysts say Seven Up still has a strong grip of the soft drink and beverages industry given its distribution channel cross the country.

Industry experts also added that Seven Up’s strong brand will contribute to the overall growth of the company in subsequent quarters. This mean the value of shareholders will be maximized and it is expected that dividends payment will be steady.

The well branded product of the company has improved the return on its advertising and marketing budget as selling and distribution expenses fell by 17.23 percent to N8.46 billion in 2015 from N10.24 billion the previous year.

This also means customers insist on the company’s brand and they are willing to pay for the product in preference to lower-priced offerings.

Although consumer wallets in Africa’s largest oil producer are pressured on the back of a weak economy, Seven Up’s penetration in the rural areas than urban Nigeria means sales will increase in subsequent quarters.

This also gives the company higher market leverage than other newer fringe players competing with the products in cities.

The company has a strong assets base as total assets moved by 8.15 percent to 66.46 billion in 2015 61.45 billion in 2014. Return on equity (ROE) 9.13 percent 22.53 percent in 2014 on the back of lower earnings.  Return on assets (ROA) was also down to 3.35 percent in 2015 from 7.30 percent in 2014.

The company share price closed at N174.50 on the floor of the NSE while market capitalization was N174.50 billion.

 

BALA AUGIE