Improved margins have driven Ashaka Cement half-year profit as the unit of Lafarge SA is aggressively expanding operations with the aim of burgeoning growth.
For the first six months through June 2014, pre-tax profit surged by 166.16 percent to N4.39 billion, from N1.65 billion the same period of the corresponding year (HY) 2013.
Profit after tax followed the same growth trajectory as it also spiked by 201.41 percent to N3.51 billion in HY 2014, from N1.15 billion as of HY 2013.
The improved margins could be attributed to the company’s use of coal from the Maiganga Coal Mine in Gombe State, as alternative and cheap source of generating electricity for production purpose.
As a result of the aforementioned, production costs reduced as cost-of-sales margin dipped to 58.13 percent in 2014, from 80 percent in 2013, while cost of sales also fell by 22.44 percent to N6.71 billion.
Net margin, a measure of profitability and efficiency, spiked to 28.33 percent in 2014, from 9 percent in 2013.
Earnings per share (EPS) increased to 157k in HY 2014, compared with 52k as of HY 2013.
However, growth was slow at the top-line level as revenues grew by a single digit 4 percent to N12.32 billion in HY 2014, from N11.80 billion as of HY 2013.
The slow growth at the top-line level may have arisen due to decline in the demand of cement caused by the rainy seasons, which may have impacted on second quarter sales.
The Nigeria 17 million housing deficits and burgeoning middle-class, according to analysts, are an immense opportunity lurking for Ashaka to tap into and bolster performance and also increase its share of the market.
Ashaka has an aggressive expansion plans as the firm has secured N50 billion credit facility to support expansion activities across the country. It had in April revealed plans to pump N100 billion into capacity expansion, coal-fire captive power plant, among other projects. These are estimated to be completed within 24 to 30 months.
The company however faces stiff competition in North East from Dangote Cement as most of its products are mainly distributed the region.
The insecurity in North East, which has been slowing growth, could be heightened by the upcoming elections as observed by most analysts.
Total assets were up by 6.33 percent to N71.69 billion in HY 2014, from N67.22 as of June 2013.
Return on average equity (ROAE) was 10.14 percent in HY14, while return on average on assets stood at 7.44 percent.
BALA AUGIE
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