Vitafoam’s half year to March 2014 revenue hits N8.85bn

Background

Vitafoam Nigeria plc is a Nigeria-based company engaged in the manufacture of polyurethane products in Nigeria and West African sub-region.

The company produces flexible polyurethane foam for bedding, furniture, carpets, cushions and automotive markets. In addition, it also manufactures technical foam products for specialised and diverse application in consumer, transportation and farming, as well as oil and gas sector.

The company’s range of products includes flexible foams, inner core spring mattresses, fibre pillow products and rigid foam. The company operates through its subsidiaries – Vitafoam Sierra Leone Ltd, Vitafoam Ghana Ltd, Vitapur Nigeria Ltd, and Vitablom Nigeria Ltd.

Vitafoam has 819 million shares outstanding with shareholders fund of N3.44 billion as of half year to March 2014.

Financial performance for half year to March 2014

For the half year to March 2014, Vitafoam’s revenue rose by 1 percent year-on-year (YOY) to N8.85 billion from N8.78 billion corresponding period of 2013.

The growth at the top-line was translated into bottom-line growth as profit before tax increased by 2.48 percent to N599.89 million in the review period compared with N585.33 million same periods in the prior year 2013.

This confirms the company’s efficient management of investments and assets which the shareholders have entrusted in their custody to generate a reasonable level of profit. The profit margin increased from 4.42 percent to 7.6 percent.

The company’s gross profits were up 10.40 percent half year to March 2014, to N2.90 billion from N2.63 billion – indicating better management of direct costs attributable to projects.

Cost of sales margin reduced to 67.11 percent in half year to March 2014, from 70.1 percent last year – this validates the company’s cost control mechanism.

Gross profit margin, which shows the relationship between turnover and cost of sales, and is a proof of the ability of the company to control cost of inventories and pass along the price increase through sales, increased by 10.14 percent to N2.90 billion in the review period.

Operating profit also increased by 14.25 percent to N953.78 million in the review period from N834.379 million in 2013. This signifies the company’s ability in cutting down operating expenses as operating margin decreased to 22 percent in 2014 from 20 percent in 2013.

Despite a 17.84 percent increase in operating expenses to N2.02 billion in the review period, operating profits spiked, indicating efficiency in appropriating relevant expenses in generating turnover.

The fixed asset turnover highlights the effectiveness of the Group in generating turnover from investment in assets.

The total asset turnover in the period was 0.74 times, signifying Vitafoam’s ability to translate investment in assets to turnover then to profits.

Trade and other receivables in the review period rose by 57.1 percent to N2.88 billion in the quarter, this highlights the need for management to intensify efforts in the collection of outstanding debts.

In order to expedient the recovery of payment from customers, the Group should implement a risk management policy to monitor the performance planning in line with budgetary provision as this will reduce outstanding debts.

The average collection period, which is the number of days required to convert receivables to cash is 90 days in the year.

Amount owned to customers surged as trade and other payables increased by 83.0 percent to N4.49 billion in the review period compared with N2.45 billion in 2013.

Total assets for the half year to March 2014, were up 5.04 percent to N11.94 billion from N11.37 billion as of Q1’2013.

Share performance and outlook

Vitafoam Nigeria plc’s shares closed at N4.15 on May 21, 2014, on the floor of the Nigerian Stock Exchange, and market capitalisation on the same day was N3.39 billion.

BALA AUGIE