Nigerian food maker, Nascon Allied Industries Plc, saw its profitability falter in the first three months of 2019 as the food maker’s direct and indirect costs dwarfed top-line growth.
The food maker’s revenue grew marginally by 0.8 percent to N6.82 billion in the quarter review, failing to keep pace with the cost of sales, which rose 8.4 percent from N4.7 billion in the previous comparable quarter to N5.1 billion in the review period.
Analysis of revenue from contracts with customers across regions revealed that proceeds from North (N4.0bn) accounted for 59 percent of the firm’s revenue in the review period, followed by West (32%) and East (9%).
Operating profit of Nascon declined 29 percent to N999.4 million in the review period from N1.41 billion a year ago, driven by a decline in other income and elevation in indirect cost which grew by nearly 10 percent to N729.4 million from N665.7 million twelve months ago.
Consequently, operating cost dipped 651 basis points to 14.7 percent in the first quarter of 2019, compared with 20.8 percent reported in the previous corresponding quarter.
This, therefore, means that the food maker retained about N15 from every hundred naira earned in revenue after settling variable costs.
Pre-tax profit of the food maker, which plunged 34.62 percent, was significantly battered by 73 percent dip in investment income to N41.6 million and N18.8 million expended as finance costs.
Even the 34.6 percent decline in tax expense was insufficient to save after-tax profit, which plunged by about 35 percent to N694.9 million in the review period compared with N1.06 billion a year earlier.
This rubbed off on the firm’s profit margin as the food maker was able to keep N102 from every thousand naira earned as revenue in the period as against N157, indicating 5.51 percent points decline.
Earnings per share, a metric that reveals the profit allocated to each unit of share, fell by double-digits at 34.4 percent to 105 kobo, relative to 160 kobo twelve months back.
A look at its balance sheet revealed that Nascon lost N500 million value in total assets, which reduced to N30.9 billion in the review period, triggered by a sharp decline in its most liquid assets, especially its bank balances.
Total liabilities pared some 2.7 percent to N18.3 billion on reduction in contract liabilities and current tax payable.
Nascon Allied Industries Plc provides food products such as salt, vegetable oil, tomato paste, and seasoning products. Its shares have returned 5.6 percent since the start of the year.
