Cement Company of Northern Nigeria (CCNN) last Friday announced a 117 percent increase in revenue and 119 percent rise in profit after tax (PAT) for the period ended September 30, 2019. In a year which is characterised by slow growth, with the growth rate of the nation’s gross domestic product hovering at 2 percent, the announcement of N42.5 billion revenue for the first nine months of the year came at a time stakeholders in the nation’s building industry have been calling for ingenious ways to solve housing and infrastructure challenges in the country.
When compared with N19.6 billion that was made as revenue in the corresponding period in 2018, the initiatives of the CCNN management ensured the third quarter revenue jumped by 117 percent year on year.
Cost of sales rose by a whopping 120 percent from N10.9 billion last year September to N18.5 billion this year, which was why the gross profit at the end September 2019 was N18.5 billion compared with N8.6 billion in September 2018, an increase of 114 percent during the period.
Finance costs increased by three digits to N92.3 million as at September 2019 in contrast to N28.8 million last year September, representing an increase of 104 percent.
Profit after tax increased by 119 percent to N8.76 billion in Q3 2019 up from N4.01 billion in Q3 2018.
In terms of efficiency, the surge in revenue and profitability meant little of CCNN. This is because when evaluated by cost of sales to revenue, this metric remained virtually flat during the period. Last year September, cost to revenue for CCNN was 56 percent, meaning that it cost the company N56 to generate N100 revenue. By September 2019, the metric declined marginally to N57 to generate N100.
In the same manner, profit margin remained virtually the same during the period under review. Profit margin was 20 percent in Q3 2018 and was slightly higher at 21 percent in Q3 2019.
The weak profit margin may be attributed to the stiff competition in the cement industry and the infrastructure challenges that affect distribution of goods in the country.
“The company faces stiff competition from other bigger cement players in the industry within the region. The strong presence of other cement product in our distribution channel did not hinder our supply to the market. However, our products are preferable due to its high quality and general acceptance within the region. CCNN will continue to introduce several sales and marketing initiative in ensuring that its targets and distribution of its product is acceptable by its teeming customers”, CCNN stated.
Traders were not moved by the announcement as despite trading 472,860 units of its shares, CCNN’s share price fell by 6.25 on Friday last week to close at N15 per share. Year to date, its share price has declined by 22.7 percent.