Cutix boosts sales 21 percent in most recent period

Cutix Plc., the manufacturer of electric cables seems to be striding at the top and bottom lines despite economic lethargy and infrastructure bottlenecks that makes it practically impossible for companies in Africa largest oil producer grow and deliver on their strategic objective of profit maximization.

For the period ended 31 October 2015, Cutix sales increased by 21.05 percent to N1.38 billion from N1.14 billion last year.

Net profit moved by 77.30 percent to N48.64 million as the company continues to struggle with huge costs that result in slim profit margins.

Analysts say the cable maker is a super impressive company as latest earnings result of most firms quoted on the floor of the bourse showed they took a hit from the economic doldrums and operational challenges that has become a phenomena.

Cable Manufacturers Association of Nigeria (CAMAN) has bemoaned the foreign exchange restrictions imposed by the Central Bank.

The restriction impedes manufacturer’s access to dollars necessary to procure raw materials and settle suppliers.

After the devaluation in 2014 that jerked up the cost of imported raw materials, the central bank stabilized the naira by imposing trading restrictions and banning importers from using the foreign-exchange market for about 40 items.

The policy of the CBN is affecting the CAMAN members especially in the area of importation of raw materials, according to Ifeanyi Uzodike, President of cable manufacturers.

“It does not allow them to import cables especially Copper Rot, which are not seen in Nigeria,” said Uzodike.

The Abuja based bank said the policy is expedient in order to defend the currency, stem the depleting foreign reserves falling due to a 60 percent drop in the price of oil to below $40.

Oil accounts for two thirds of government revenue and 90 percent of foreign exchange earnings.

Economic growth slowed to 2.4 percent in the second quarter of 2015 while manufacturing contracted by 3.8 percent, after a 14 percent expansion a year earlier.

Despite improved performance in sales and profits, Cutix’s cost of sales grew by 19.30 percent to N994.50 million in 2015 compared with N833.33 the previous year as the company grapples with huge energy costs and bad roads that spirals distribution costs.

Further analysis of the company’s financial statements show gross profits were up by 25.37 percent to N338.36 million in 2015 as against N309.77 million in 2014 despite rising costs.

Gross profit margins increased to 28.14 percent in 2015 as against 27.08 percent in 2014.

Industry experts say multiply taxation, influx of cheap and substandard cables into the country and government handling of the Local content Act with kid gloves has become a stumbling block to cable makers in Africa largest economy.

Cutix share price closed at N1.63 on the floor of the exchange while market capitalization was N1.43 billion.