Nairametrics|A close examination of Vitafoam’s 2016 results reveal, the problems companies in the industrial and FCMG sector face in the Nigerian economy. Finance costs of 895 million naira in 2016 are greater than the operating profits of 888 million naira in the same period. The company paid a total of 774 million naira interest on loans in 2016. Bad debts went from 48.4 million naira in 2015 to 149.7 million naira in 2016. Reflecting the tough business environment in the country. The company needs to either renegotiate its loans, or look for a cheaper form of financing. The parent company made a loss after tax of 32 million naira for the second year running. Earnings per share also declined from a loss of 3.74 kobo in 2015 to 3.88 kobo in 2016.There was also a drop in turnover both within and outside the country (comprising operations in Ghana and Sierra Leone).
Despite the poor results, Vitafoam still proposes to pay a dividend of 12 kobo per share subject to the approval of shareholders. Thus dipping into its retained earnings which stood at 2.5 billion naira as at year end 2016. This is a poor allocation of resources. The company would have been better off paying down interest on its loans. More worrisome is the increase in board compensation despite the poor results. Renumeration paid to the Chairman increased from 7.9 million naira in 2015 to 13.8 million naira in 2016. Emoluments paid to the highest earning director went up from 22.7 million in 2015 to 38.3 million naira in 2016. This clearly shows the company is not being prudent with scarce resources. Such increases could have been postponed or converted to share options for executive management.