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Spiraling costs erode Academic press profit

Spiraling costs erode Academic press profit

Financial Performance

Insurmountable costs have eroded the profit of Academic Press Plc as the Nigeria publishing giant continues to grapple with tough operating environment, analysis of the financial statement shows.

For the third quarter ended December 2014, the company posted a loss after tax of N110.29 million from N54.10 million the same period of the corresponding year (Q3 ended December) 2013.

There were slight improvements at the top line level as sales increased by 4.60 percent to N1.59 billion as against N1.52 billion the preceding year.

The bottom line level was eroded by huge production costs as cost of sales increased to 67.30 percent in 2014 from 58.30 percent as at Q3 ended December 2014, which means the company spent N0.90 for every N1 of sales generated.

This also impacted on direct costs attributable to projects as gross profit reduced by 17.24 percent to N517.06 million compared with N624.94 million the preceding year while gross profit margin fell to 32 percent in 2014 as against 41.20 percent (Q3 ended December) 2013.

Finance costs increased by 81.30 percent to N132.20 million in 2014 compared with N72.93 million the preceding year, while operating expenses reduced by 8.91 percent to N457.35 million as against N502.10 million the preceding year.

Academic Press total assets moved by 2.37 percent to N3.70 billion in 2014 as against N3.79 billion as at Q3 2013. Current ratio measure of liquidity dipped to 0.69x compared with N0.82x the preceding year which is below the 2.1x industry average.

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Challenges of the Nigerian publishing sector

The publishing industry has been unable to exploit Nigeria’s huge population and growing middle class to net income as bad roads, spiralling energy costs and rising raw materials continues to hinder growth.

Nigeria has been struggling with unstable power supply despite huge amount of money spent by government in revamping the ailing sector.

A lot of firms in this sector incur huge energy costs due to the high costs of running generators which is an alternative source of power compared to power from the national grid. Also, lack of local raw materials have made these firms import raw materials from abroad; making them vulnerable to foreign exchange risk as the recent devaluation of the country’s currency has made import more expensive. It means more publishers may give in to cost pressures in the long run

Central Bank of Nigeria (CBN) has just devalued the naira by 8 percent in order to shave off the impact of drop in oil revenue caused by glut at the international level.

Industry experts also identified substandard production, inadequate production of paper mills, piracy and copy right, poor marketing strategy, poverty and underemployment as hampering growth of Nigeria publishers.

According to Oyedokun T. Tunde faculty of communication and information science, University of Ilorin, there are three pulp and paper mills in Nigeria with a total installed pulp capacity of 102,000 mt per annum and a paper capacity of 207,000 mt per annum. Since 1990, the production of newsprint had been declining from 31,000 mt out of an installed capacity of 100,000 mt per annum, to only 3,000 mt, in 1993.

He also added that the Nigerian Newsprint Manufacturing Company (NNMC) had remained shut since 1994, due to problems of spare parts and other logistic problems. The Nigerian Paper Mill (NPM) at Jebba produces industrial grade paper, specifically kraft and kraft linerboard. The old paper machine had a capacity of 12,000 mt but since 1994, a new machine with capacity of 65,000 mt has gone on stream. Production of paperboard in 1990 was 12,498 mt and declined progressively to 2313 mt in 1992 from where a gradual up turn began. Paperboard production by 1996 was 19,744 mt and production had remained at this level.

BALA AUGIE