The Cement Company of Northern Nigeria Plc (CCNN), through reduction in operating and finance costs, was able to increase profit by 91 percent, as the company continues its aggressive expansion drive with a view to increasing its market share.
For the first six months through June 2014, the Sokoto based company’s net income was up by 91 percent to N1.58 billion from N832.2 million in the same period of the corresponding year (HY) 2013.
This is the most impressive bottom line performance among the four major cement makers in the industry as most grappled with huge cost caused by shortages of gas supply.
The stellar performance is also coming amid security challenges caused by the Boko Haram insurgency which has been hampering the growth potentials of firms operating in the Northern region.
The spike in profit was as a result of focus strategy fuelled by effective and cost control mechanism as distribution and administrative expenses reduced by 44 percent to N1.32 billion in HY 2014 from N2.34 billion the preceding year.
Similarly, operating expense ratio were down to 14.05 percent in HY 2014 as against 26.55 percent as at HY 2013.
CCNN’s also trimmed its cost of production as cost of sales margin reduced to 60.80 percent in 2014 compared to 0.65 percent, cost of sales fell by 1 percent to N5.71 billion.
There were improvement in direct material attributable to projects as gross margin increased to 39.19 percent in 2013 from 34.85 percent last year while gross profit increased by 19.1 percent to N3.68 billion.
In order to increase the capacity of its 30 year plant, CCNN launched a $300 million expansion project. The expansion project is estimated at about N48 billion and this will increase the company’s installed capacity by 200 percent to 1.5 million metric tons.
The company also recognizes that a competitive strategy and strong balance sheet are expedient to competing with peer rivals as it intends to float supplementary equity issue to refinance its capital structure and provide long-term funds necessary for such long-term expansion project.
Also boosting profits is a reduction in finance costs by 30 percent to N52.75 million as against N75.91 million in the preceding year.
Revenue rose by 7 percent to N9.39 billion in HY 2014 as against N8.81 billion as at HY 2013.
The slow top line analysts say arose as result of weak demand for cement caused by the rainy seasons and weak spending by government on infrastructure fuelled by delay in the passage of the 2014 budget that slowed construction activities in the first two quarters of the year.
Net margin, a measure of profitability and efficiency spiked to 16.82 percent in HY 2014 as against 9.20 percent last year.
The company’s utilization of assets to generate profits slid as fixed assets turn over reduced to 0.53x in 2014 as against 0.58x last year. Total assets were up by 17.20 percent to N17.64 percent in 2014 from N15.05 billion the preceding year.
The return on average equity was ROAE was 16 percent while the return on average assets ROAA stood at 23 percent.
The company’s share price closed at N14.40 on the floor of the Nigeria stock exchange while market capitalization was N18.09 billion.