Some variables that analysts use to measure a firms performance were unfavorable to Transnational Corporation (Transcorp) as the company’s 37.79 percent profit fall replicated past earnings reports which showed the same trend.
- Cost of sales margin moved to 39.70 percent in the period under review from 29.42 percent last year. It means Transcorp is spending more on input costs to produce each unit of product.
- Net margins were down to 37.48 percent in 2015 as against 45.96 percent last year.
- This means the company is less efficient in reducing costs to generate higher profit.
Gross profit margins reduced to 60.24 percent in 2015 from 70.75 percent in 2014.
- Return on equity (ROE) fell to 4.67 percent in 2015 from 7.66 percent the previous year. This means Transcorp should improve on using the resources of owners in generating higher profit.
Firms 37.79 percent profit fall replicates past earnings
Arguably the most diversify company in Africa largest economy; the company has not been taking advantage of its well diversified portfolio to bolster performance.
Profit was N 4.28 billion in the first six months through June 2015, compared with N6.88 billion the previous year, the Lagos-based company said in an e-mailed statement on the NSE.
Sales decreased 4.52 percent to N20.25 billion.
The last time the company’s net income leaped was in the first quarter of 2014, when it recorded a 278.01 percent rise.
Since then, its profits have been falling like a pack of cards.
Hugh debts mean the company is highly geared
Transcorp’s debt to equity ratio of 58.24 percent means more than 50 percent of the company balance sheet or operations are funded by lenders money while the remaining by equity holders.
It also means interest payments paid on loans is a drag on the bottom line as finance costs increased 41.50 percent to N3.01 billion.
The total borrowing in the company balance sheet was N53 billion, representing an increase of 10.97 percent from N47.76 billion recorded last year.
- Gross profits were down by 18.44 percent to N12.20 billion in 2015 from N14.96 billion the previous year.
- Cost of sales increased by 28.20 percent to N8.044 billion in 2015 as against N6.25 billion last year.
- Profit before tax PBT fell by 35.50 percent to N5.16 billion in 2015 as against N8 billion in 2014.
- Total assets increased by 3.67 percent to N177.02 billion in 2015 from N170.75 billion in 2014.