Honeywell released its 2014 Q1 results showing a 432% rise in pre-tax profits to N585million compared to N110m a year earlier. Even thought this is still the first quarter, the result is sure to turn on heads if anything in here suggest H1 results will follow suit.
However, a further look at the results suggest unlike profits, revenue was flat N13.1billion making the rise in profits mostly a function of a reduced cost of sales. 2013 was an exceptional year as the company posted N11.3billion in cost of sales for the year compared to N10.9billion in the period under review. Gross profit margin was also 14.5% that quarter compared to the prior 4 quarters and next 3 quarters following June 2014.
Interest cost was also much lower this quarter (April to June 2014) compared to the same period last year. The company reported interest payment of N158million compared to N360million a year earlier. Ironically interest has been dropping for the company over the last three quarters even as their debt balance has been increasing.
Whilst this result was indeed very impressive it is far from a blow out considering the peculiarity of the prior year results. In fact, if you compare this quarters result to the preceding quarter (Jan – Mar 2014) then the pre-tax profits would be about a 62% drop. Also the pre-tax profits of N696million posted in Q1 2012 is still much higher than the N585million posted in the quarter ended June 2014.