Cost cuts help John Holt revert to profitability

The cost control mechanisms put in place by the savvy management and boards of directors of John Holt Plc has paid off as the Nigerian conglomerate reverted to profitability amid huge infrastructure deficit and low patronage from major oil and gas firms.

For the first six months through March 2016, John Holt posted operating profit of N102 million from a loss position of N466 million posted in the corresponding year of 2015.

The company’s top lines also followed the same growth trajectory as sales increased by 5.23 percent to N1.32 billion in the period under review.

John Holt’s impressive performance was due to its costs cuts strategy that saw total operating expenses reduced by 62.86 percent to N283 million while manufacturing cost of sales were down 2.2 percent to N942 million in 2015.

These strategies help bolster margins as operating profit margin, a measure of profitability and efficiency, moved to 7.69 percent in March 2016 from less than one percent.

The Nigerian conglomerate is also spending less to produce each unit of products as operating expenses margin fell to 21.34 percent in  2016 as against 60.47 percent as in 2015.

Also, gross profit, which measures the extent to which a company is efficient in managing direct costs attributable to projects increased by 30.04 percent while gross profit margins jumped to 29.06 percent in 2016 compared with 23.70 percent in 2015.

Analysts say the stellar performance by John Holt means there is a silver lining for companies grappling with unstable electricity supply and economic headwinds caused by a drop in oil price, foreign exchange restrictions and rising inflation.

The economy of Africa’s largest economy has been under severe battering as its only export products, crude oil, fell 60 percent to $42 a barrel, forcing the central bank to impose restrictions in order to curb inflation and prevent the continued depleting of the reserves.

Despite the apex bank’s policy, inflation jumped to 12.80 percent in March as against 11.40 percent in February on the back of a hike in transportation fares and rising price of food stuffs.

Economic growth slowed to 2.80 percent, the lowest in a decade.

Manufacturers and conglomerates bemoan the policy since it hinders them from accessing the necessary dollars to import raw materials and machineries.

PZ Cussons Plc said it is paying as much as 70 percent more than the official rate for dollars in Nigeria, as central-bank trading restrictions reduce availability of foreign currency in Africa’s biggest economy.

John Holt said it will acquire new transformers, own brand generator, and source long term capital for the purpose of funding capital projects.

 

BALA AUGIE