Chemical and Allied Products (CAP) Plc, an indigenous paint manufacturer and subsidiary of United Africa Company of Nigeria, amid a challenging macroeconomic environment posted an impressive scorecard for full year 2018 to grow its top-line and bottom-line.
Gross profit grew 15 percent to N3.73 billion in 2018 compared to N3.25 billion in the preceding year. The improvement was on the back of a faster pace of expansion in its sales to N7.76 billion in 2018, 9.15 percent more than its 2017 figures, while cost of sales grew 4.41 percent to N4.03billion in the period under review.
CAP, the owner of popular Dulux and Caplux paint brand, generates revenue from sales of paints and application of paint.
Turnover from sales of its paint product, which contributes more than 90 percent to revenue, rose year on year by 10 percent to N7.76 billion although its services segment slowed in the review period.
Gross margin improved as CAP was able to retain 48.04 percent of its revenue in 2018 compared to N45.68 percent in the year before. The margin is a measure of profitability, comparing revenue with cost of production.
CAP attributes its top-line performance to the adoption of various cost reduction initiatives and improved efficiencies.
‘’This was achieved through products’ reformulation and vendor-managed inventory initiatives,’’ a note attached to its 2018 results read.
An increase in selling and distribution expenses of 18 percent and a near double-digit rise in administrative expenses coupled with a 20 percent drop in other income was not enough to weigh on the manufacturer’s operating profit which saw a 16 percent growth to N2.29 billion in 2018.
Consequently, operating margin improved from 27.77 percent in 2017 to 29.43 percent in 2018. The improvement implies CAP made more profit on a naira of sales, after paying for variable costs of production but before paying interest and tax.
Net finance income grew 51.74 percent to N312 million in 2018, after a decline in finance cost by about 30 percent and a 44 percent growth in finance income. Interest cost for the paint manufacturer fell by 81 percent in the year.
Appreciation in CAP net finance income buoyed the company’s performance to grow profit before tax by 17 percent, amassing N2.597 billion in 2018 compared to N2.181 in 2017.
In 2018, CAP recorded a 16.76 percent decline in tax expenses to N568 million and grew Net income from N1.499 billion in 2017 to N2.029 billion in 2018.
Net margin for CAP for 2018 was at 26 percent, the highest it had recorded in the last 5 years. Earnings per share rose to N2.9 in 2018 from N2.14 in 2017.
The company’s Return on Asset (ROA) which shows the amount earned on each naira invested in asset improved to 32.15 percent in 2018 from N29.89 percent in 2017 while Returns on Equity (ROE), efficiency metric, show CAP effectiveness in using asset to generate profit as the ratio rose from 66.84 percent in 2017 to 72.25 percent in 2018.
CAP recommended a final dividend of 250 kobo per share for shareholders’ approval ahead of its 54th annual General Meeting to hold on June 20, 2019.
Chemical and Allied Product is down 2.44 percent on Year to Date as at Thursday when the market closed for the Easter break. The stock which closed at N34, gaining 0.74 percent on Thursday, is 32 percent above its 52-week low of N25.75 established November 2, 2018.
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