Aluminium Extrusion Industries plc’s huge input cost has slowed third quarter (Q3) profit, as the company continues to grapple with the unpredictability of the Nigeria economy, analysis of the company’s financial statement shows.
For the first nine months through September 2014, the company’s profit after tax (PAT) fell by 59.14 percent to N37.56 million from N91.94 million the same period of the corresponding year (Q3) 2013.
The decline in profit, analysts say, is attributable to huge cost of production incurred by the company.
Based on BusinessDay analysis, cost of sales margin was as high as 89.47 percent, higher than the 85.40 percent recorded last year.
It means that for every N1 of sales generated by Aluminium Extrusion, it spent N0.89 on input cost.
Net margin, a measure of profitability and efficiency, fell to 2.46 percent in the review period as against 6.53 percent the preceding year.
Earnings per share (EPS) reduced to 17k in Q3 2014, compared with 42k last year, while return on equity dipped to 3.84 percent as against 9.64 percent the preceding year.
Additionally, cost of sales was also increased by 14.28 percent to N1.36 billion in the review period compared with N1.19 billion the preceding year.
The mounting cost pressures also impacted on direct costs attributable to projects as gross profits were down by 22.25 percent to N165.82 million, while gross profit margin fell to 10.84 percent to as against 15.40 recorded the preceding year.
It should be noted that the results underscore the challenges of Nigeria roofers as huge energy costs, high import by the Nigeria Customs Service and tax issues continues to weigh on bottomline performance.
As earlier reported by BusinessDay, roofers are also challenged by influx of cheap materials from Asia countries like China.
However, sales were up by 8.57 percent to N1.53 billion as against N1.40 billion the same period of the corresponding year 2013.
Alumium Extrusion total assets reduced by 2.38 percent to N1.64 billion from N1.68 billion the preceding year.
Analysts say Nigeria roofers can tap into the huge opportunities in the Nigerian economy driven by rapid urbanisation as a result of population explosion, surge in the demand for building materials and the new mortgage refinancing scheme by the federal mortgage authority.
Nigeria with a population estimated at over 170 million, and growing at a rate of 3.5 percent per annum, has a shortfall in the supply of housing units that has been estimated to be between 16 – 17 million.
Furthermore, with an economic growth rate averaging 7 percent per annum in the past five years, Nigeria has witnessed a growth in the number of middle-class families with the associated need to have a home of their own, thereby further deepening the real estate market in Nigeria, hence roofing needs.
It should be noted that over 60 percent of the entire population of the country live on rented accommodation, and this indicates another embryonic market for the Nigerian roofers to exploit.
The company’s share price closed at N10.43 billion on the floor of the Nigerian Stock Exchange, while the market capitalisation was N2.29 billion.