The half year revenue of Nigeria Ropes, a company that manufactures fibre, manila and steel wire ropes, increased by 45.5 percent as it resiliently continues to tap into opportunities abounding in the Nigerian economy.
For the first six months through June 2014, the company’s revenue rose by 45.5 percent to N188.59 million from N129.61 million the same period of the corresponding year (HY) 2013.
The slow growth in the oil and gas industry, which was fuelled by pipeline vandalism, oil theft and the Niger Delta crisis, took a toll on the Nigeria Ropes cash flow as most of its customers are in oil sector.
“Most of the oil companies stopped investing in offshore and they will not buy materials from us,” said Kola Karim, chairman of the company, at its annual general meeting held recently in Lagos.
“Boom in the oil and gas industry will help boost the company’s performance,” said Karim. Based on BussinessDay’s analysis, Nigeria Ropes managed effectively its direct costs attributable to projects as gross profit increased by 48.30 percent to N102.95 million in HY 2014, compared with N69.42 billion the preceding year.
Additionally, cost of sales and gross profit margins remained flat at 54 percent and 45 percent, respectively. The company, as a result of aggressive expansion aimed bolstering performance with a view to giving shareholders a high returns on their investments, incurred huge operating costs.
BusinessDay analysis further shows operating expense margin ratio was as high as 78.54 percent in the reviewed period.
Nigeria Ropes profit after tax fell by 27.20 percent to N71.01 million HY 2014, from N97.55 million as of HY 2013, as high opex margin and spiraling staff costs pressured and swallowed most of the gross profits.
One of the major challenges besetting the company is influx of cheaper and inferior materials without certifications from China, a situation that affects top-line performance.
“Our major challenge is with our competitors who don’t care about quality,” said Joao Pereira, the managing director of the company, in a recent interview with BusinessDay.
Nigeria Ropes has also created an inspection and specification department for the purposes of lifting equipment.
In 2014 alone, the inspection service department made up 70 percent of the company’s revenue.
Total assets were up down by 10.38 percent to N660.57 million in HY 2014, as against N373.08 million the preceding year. Its share price closed at N7.46 on the floor of the NSE, while market capitalisation was N1.96 billion.
BALA AUGIE
