Portland Paints in growth spurt buoyed by merger synergies

Background

Portland Paints and Products Nigeria plc was incorporated as a private limited liability company on September 3, 1985. The company by a special resolution of April 24, 2008, changed its name to Portland Paints and Products Nigeria plc, consequent upon it becoming a public liability company.

The company and its subsidiary are principally engaged in the business of manufacturing and sale of paints, marketing of sanitary ware, construction and renovation of buildings.

PPNL has total share outstanding of 400 million with shareholders fund of 947.45 million as of March 2014.l

Financial results for Q1 2014

The year started on a stellar note as PPNL recorded an impressive first quarter results, a growth recorded art both the top- and bottom-line levels.

For the first three months of the year, the company’s revenues rose by 17.17 percent to N735.45 million from N624.85 million, compared with corresponding period of 2012 (Q1).

The company was able to translate the impressive result at the top-line to bottom-line growth as profit before tax surged by 215.5 percent to N93.25 million in the review period compared to N29.55 million as of Q1 2013.

Profit after tax also spiked by 215.5 percent to N63.41 million in Q1 2014, as against N20.09 million as of Q1 2013. Net margin, a measure of profitability and efficiency, jumped to 8.62 percent in Q1 2014, as against 3.21 percent-backed by effective cost control.

The stellar performance means PPPNL is tapping the strength and opportunity in the paints industry.

More opportunities awaits the company to tap into as new housing refinancing scheme by the Nigeria Federal Mortgage Housing Authority (FMHA) with its primary objective of bridging the 17 million housing deficit means the demand for paints will surge.

Portland Paints is aggressively leveraging the relative strength of United Africa Company of Nigeria (UACN).

Last year, UACN acquired 51 percent equity stake in Portland Paints and Products with a view to forming synergy.

Operating expenses for the first three months of the year reduced slightly by 1.2 percent to N252.04 million from N255.08 million as of Q1 2013. Cost-of-sales margin reduced to 53.5 percent in Q1 2014, compared with 54.7 percent as of Q1 2013, while gross margin remained flat at 46 percent.

Total assets were down by 6.88 percent to N2.0 billion in the review period compared with N2.25 billion as of Q1 2013.

Assets utilisation to generating more sales increased as fixed asset turnover moved to 36.5 x in Q1 2014 from 27.1x as of Q1 2013.

With the passage of the PIB, it is expected it will boost investment in the oil and gas industry as the company generates a large chunk of its revenue from this sector.

Share performance and outlook

The company’s share price closed at N4.81 – June 12, 2014, on the floor of the Nigerian Stock Exchange, while market capitalisation was N1.92 billion on the same day.