• Thursday, March 28, 2024
businessday logo

BusinessDay

Chemical and Allied Products earnings up 8 percent in Q1 2019

Untitled design(34)
Chemical and Allied Products (CAP), a subsidiary of United Africa Company of Nigeria, started 2019 on a positive note, posting its biggest first-quarter profit in five years, albeit at slower growth compared to 2018 first-quarter.
The paint manufacturer announced on Wednesday that it earned N498.9 million in profit in the three months to March 2019, 8 percent more than its 2018 figure of N462.3 million. The drivers of growth were improvements in sales and net finance income.
Although the earnings in the first quarter of 2019 is the company’s highest in the last five years, the rate at which profit grew year on year in the first quarter of 2019 slowed to 8 percent compared to 18 percent in the first quarter of 2018.
Notwithstanding, the performance in the first quarter follows a strong 2018 full year where CAP improved its top-line and bottom-line with profit after tax in double-digit growth.
For the latest quarter, CAP saw a turnover increment of 8 percent to N2.12 billion from N1.96 billion in the corresponding period of 2018. CAP, which owns the premium paint brand, Dulux alongside Caplux and other products, makes its income from sales of paint products as well as the application of paint services.
Turnover from sales of paint segment was up 7 percent to N2.11 billion, contributing more than 90 percent to revenue while services segment contributed N14.3 million although it didn’t add to the revenue of CAP in the first quarter of 2018.
CAP was able to retain N48.77 after accounting for the direct cost of sales from every N100 sales in 2019, maintaining its 2018 Q1 gross margin of 48 percent. A higher gross margin shows a company retains more on each naira of sales to service its other costs and debt obligations.
Operating profit barely changed in the review period with a 0.65 percent increase to N615 million. The net effect of an 88 percent surge in selling and distribution expenses and 22 percent spurt in other income meant operating income remained around first quarter 2018 levels.
Consequently, operating margin, which shows how much CAP was able to keep after paying for its variable cost of production but before settling interest and tax obligation, fell in the first quarter of 2019 to 29.01 percent from 31.14 percent in the corresponding period of 2018.
Net finance income grew 73 percent to N118.6 million on 69 percent growth in finance income and no finance cost incurred by CAP in the period.
The gains in net finance income were enough to see profit before tax improve by 8 percent to N734 million in the three-month period of 2019 as against N462 million made previously in 2018.
A decline in tax expenses up to 8 percent also contributed to the 8 percent surge in the company’s profit after tax, although its net margin remained at approximately 24 percent in the same quarter of both years.
Earnings per share, however, grew to 71 kobo in the recently concluded quarter from 66 kobo in the preceding year.
Chemical and Allied Products is down 2.44 percent on Year to Date as at Wednesday where the stock closed flat at N34, 32 percent above its 52-week of N25.75 established November 2, 2018.