Background
Cement Company of Northern Nigeria Plc (CCNN) is a 50.72 percent-owned subsidiary of BUA Group, a Nigerian conglomerate with business interests in the sugar, flour, real estate, oil and ports & terminals industries.
It was incorporated in 1962 and commenced production in 1967, with an initial installed capacity of 100,000 tons per annum Kalambaina plant. This was expanded to 0.5mn tpa in 1985, at which time the first line was closed down due to its uneconomic mode of operation.
The Group was listed in 1993, and is based in Sokoto in the North-western part of Nigeria. Its markets span six states of the North-western area, namely, Sokoto,Kebbi, Zamfara, Katsina, Kano and Kaduna. It is the leading supplier in this geographical area.
CCNN has shares outstanding of 1.25 billion with shareholders’ fund standing at N9.06 billion as at the end of December 2013.
Financial Performance for year ended December 2013
For the year ended 31 December 2013, Cement Company of Northern Nigeria Plc (CCNN)’s revenue increased by 4.37 percent to N15.78 billion from N15.12 billion as the corresponding period of 2012.
The slight slow increase in top line performance was a result of stiff and intense competition by rival companies such as Dangote Cement, Ashaka and Lafarge Wapco. Also, the insecurity in the Northern part of the country may also be responsible for low revenue growth.
However, CCNN is in an advantageous position over its peer rival companies as lack of local manufacturer in the region and will spur growth in subsequent years.
Profit before tax (PBT) for the year ended December 2013 grew by 19.21 percent y/y to N1.97 billion as against N1.65 billion as at FY13.
The company through cost control and production efficiency was able to reduce its cost of sales margin to 68.20 percent in 12M13 from in 12M12 hence gross profit increased by 18.18 percent to N5.0 billion in the review.
Operating expenses for the FY13 rose by 7.16 percent y/y to N3.64 billion as against N3.4 billion as at FY12 hence operating expense margin ratio remained stable at 22 percent FY13.
CCNN’s net margin a measure of operational efficiency and profitability jumped to 13.41 in 2013FYpercent as against 11.91 as at 2012 full year, while finance cost slid marginally by 3.37 percent y/y to N147 million in the review period.
The impressive margins may have arisen as a result of the shift to the use of coal in its proposed new plants which is cheaper than the lower pour fuel (LPO). Also the reliance on the Kaduna plants has also help reduce cost.
Return on equity (ROE) remained flat in the review period, while return on assets (ROA) in the FY13 climbed to 9.43 percent from 8.35 percent as at FY13.
Total assets for the year ended December 2013 grew by 5.74 percent y/y to N15.05 billion compared with N14.24 billion posted in the corresponding period of December 2012.
Current ratio which measures the ability of a company to meet short term obligation jumped to 1.88x in FY13 from 1.48x; moreso, this figures are lower than the industry average of 2.1x
It took 21 days for the company to collect money owned to it by debtors, which explains the drop in trade and other receivables by 29.65 percent to y/y to N782 million in 12M13 compared with 1.12 billion in 12M12.
Intangible assets for the year ended December 2013, surged by 188.39 percent y/y to N5.77 billion as against N2.0 billion same period of the prior year (FY12)
We believe that the rising demand for building and industrial materials which is expected to expand as a result of the infrastructural deficits will be the right trajectory to growth for the company.
Share Performance and Outlook
The share price of the company closed trading on the floor of the exchange at N9.75 on the 31thof March 2014.
CCNN has a market capitalization of N12.27 billion on the same day.
According to the management of CCNN, the company has signed a contract for the construction of a new 1mn tones per annum coal-fired plant through its parent company, BUA.
The financing for the project is expected to be a combination of a rights and debt issuance of up to NGN45bn. Management has already secured shareholders’ approval for the rights issue will be built by CBMI China, with construction starting in early 2014.
This expansion will also include construction of a coal mill, with delivery expected by early 2018.
BALA AUGIE
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