Vitafoam’s sales rise fails to boost net income …as PAT down 26.75 percent

 

The slow growth of Nigeria maker of foams, Vitafoams Plc, in the first nine months to June 2015 highlights the struggles of manufacturing companies in Africa largest economy.

For the first nine months ended June 2015, Vitafoam’s net income fell by 26.75 percent to N335.33 million from N457.80 million the previous year.

Sales increased by 3.74 percent to N13.84 billion as the company continues to grapple with weak consumer spending.

The performance of Vitafoam tells the story of how a lack of reliable electricity supply, Central Bank restrictions, and influx of cheaper products from China are crimping growth of manufacturers.

Nigeria’s manufacturing sector contracted by 3.8 percent in the second quarter of 2015, after a 14 percent expansion a year earlier, data from National Bureau of Statistics (NBS) show.

Vitafoams’ cost of sales increased by 5.14 percent to N9.41 billion in the period under review compared with N8.95 billion last year.

The 5.14 percent increase in cost of sales is lower than the inflation rate of 9.2 percent.

Cost of sales ratio jumped to 68 percent for the nine months ended June 2015 from 67 percent last year.

Gross profit was flattish at N4.42 billion while gross profit margins jumped to 31.93 percent.

Further analysis of Vitafoam’s financial statements shows operating expenses increased by 6.211 percent to N3.42 billion in June 2015 as against N3.22 billion last year.

Expense ratio remained flattish at 24 percent which means the company spent N24 on operating expenses to generate N100 in sales.

As part of its corporate strategy, Vitafoam, in March, pledged to expand its production of modern sleep products.

Despite the harsh operating environment, Vitafoam Nigeria Plc has proposed a dividend of N246 million, translating into 30 kobo per share in addition to a bonus share of one for every five Ordinary Shares held by each shareholder.

Analysts say the new government should ameliorate the sufferings of manufactures by removing the infrastructure bottlenecks stunting the growth of a sector that is one of the largest employers of labour.

Vitafoam share price closed at N5.80 on the floor of the exchange while market capitalization was N5.77 billion.

 

BALA AUGIE