Nascon records N1.03 billion profits despite weak macro conditions

NASCON Allied Industries Plc, the manufacturer of condiments, recorded a profit of N1.03 billion in the first six months through June amid weak macroeconomic environment.

This means the board and management of the Nigeria manufacturer of salt are pursuing the strategy goal of every business which is making profit while giving back to owners’ form of dividend payments.

This quarter’s stellar performance means the company will maintain its consistent dividend policy with a view to enhancing the return on shareholder’s investments.

The company paid a divined of N1.34 billion in 2014.

This is equivalent to a dividend gross yield of 7.46 percent, based on Bloomberg data.

For the first six months through June 2015, NASCON’s profit before tax fell slightly by 3.21 percent to N1.51 billion in June 2015 as against N1.56 billion as at June 2014.

The company’s sales increased by 22.44 percent to N6.60 billion in the period under review as against 5.37 billion the preceding year; despite stiff competition, pressured consumer wallets and disruption of operation as result of activities of the Boko Haram group.

It has been difficult times for the producer of condiments as the devaluation of the naira by the Central Bank of Nigeria (CBN) continues to expose manufacturers to volatility as they import most of their raw materials.

This causes cost of production to spiral as raw material, which forms part of production costs jumps.

The 50 percent drop in the price oil forced the Apex bank to depreciate the currency in order to curb inflation and protect the foreign reserve from continued depletion.

The Abuja based bank also imposed trading restrictions and banned importers from using the foreign-exchange market for about 40 items.

The naira was little changed after the central bank kept its key interest rate at a record high 13 percent, trading at 199.05 per dollar at 3:21 p.m. in Lagos, Nigeria’s commercial hub.

Lack of stable power supply from the grid and bad roads is a major stumbling block for consumer goods in Africa’s largest oil producer

As a result of the aforementioned challenges, NASCON’s cost of sales increased by 34.71 percent to N4.54 billion in June 2015 compared with N3.37 billion last year.

Further, cost of sales ratio jumped to 68.78 percent in June 2015 as against 62.72 billion last year. This means the company is spending more on production costs to produce each unit of products.

Net margin, a measure of profitability and efficiency fell to 15.60 in the period under review from 19.60 percent last year.

There are upside potentials in the Nigeria economy given its huge population that crave for consumption.

Data from Report Linker, an online market research firm, show that the global salt demand would climb 2.9 percent annually through 2015 to 327 million metric tons, valued at $13.6 billion.

NASCON’s share price closed at N6.70 on the floor of the exchange while market capitalisation n was N17.75 billion.

BALA AUGIE