Honeywell records profit growth despite economic slowdown

Honeywell Nigeria Plc, one of the largest millers in Africa’s largest economy has recorded profit growth despite a weak naira, currency restrictions and security challenges bedeviling most firms.

For the period ended December 30, 2015, Honeywell’s net income increased by 52.53 percent to N1.48 billion from N969 million the previous year.

Sales jumped by 5.23 percent to N39.72 billion amid weak consumer spending.

The growth at the bottom line was a result of a significant reduction in net finance charges by 65.23 percent to N602 million and a 51.39 percent drop in currency devaluation loss to N438 million in the period under review.

Honeywell’s financial expenses reflect high level of debts for some key investment in wheat pasta, and capacity expansion in Apapa, Ikamo and Agbara, according to management.

Analysts attribute the Nigerian millers’ growth at the top lines to the contributions from its new product lines such as the recently launched Koo12GO instant powered milk and Golden Penny multipurpose flour.

Despite the rising production costs caused by the devaluation the currency, Honeywell recorded a 2.31 percent increase in cost of sales to N31 billion, the lowest among millers in the country.

Consumer goods firms were hammered by the weak currency as most of them import 50 percent of raw materials to meet production. The devaluation has also wiped off gains on the price of wheat at the international market.

The Central Bank of Africa’s largest oil producer devalued the naira twice since 2014 with a view to curbing inflation and stabilizing an economy that is hard hit by a significant drop in oil price to $32 per barrel.

The apex bank has left the currency pegged at N198-N199 and further imposed foreign exchange restrictions on 41 items, policy that has been highly criticized by economists and investors for adding to slow economic growth and thwarting the growth of consumer names.

The edicts have made it difficult for manufacturers to import raw materials and obtain dollars needed to operate unencumbered.

However, Honeywell’s operating expenses moved by 9.16 percent to N5.24 billion as bad roods and daily black blackout spirals opex margin.

Net margin, a measure of profitability and efficiency increased to 3.73 percent in 2015 from 1.85 percent last year. Gross profit margins moved to 20.36 percent in 2015 as against 18.46 percent in 2014. Gross profits were up by 16.54 percent to N8.10 billion.

It is expected that the commissioning of facilities (Thai sugar plant in Ogun), ongoing sugar project and mill projected to produce 100000 metric tons of sugar annually as well as 10MW of electricity will strengthen the company’s performance in the future.

Honeywell share price closed at N1.42 on the floor of the exchange while market capitalization was N26 billion.

 

BALA AUGIE