Amidst the rebound in yesterday’s trading session at the Nigerian Stock Exchange (NSE), First Aluminium Plc hit a 5 year low. The stock opened at N0.30 and closed at N0.27, down N0.03%.
Year to date, the stock is down 25%, underperforming the NSE All-Share Index which is up by 3.11%.
Reasons behind the decline
The decline in share price is largely due to poor fundamentals. While the company is profitable, finance costs take a huge chunk of operating profits and turnover.
Results for the nine months ended September 2018 show that revenue increased from N5 billion in 2017 to N5.3 billion in 2018. Cost of sales amounting to N4.9 billion took up a huge chunk of the turnover.
Finance costs also took up a large chunk of the profits. While the firm made an operating profit of N303 million, finance costs amounted to N226 million.
Shareholders disillusioned by an absence of dividends and poor performance have shown apathy towards the stock, in the last few years.
Last year, management of the firm unveiled plans to delist from the Nigerian Stock Exchange, to enable it to raise funds. A depressed share price means that it would have to issue a large quantum of shares if it opted for a public offer or rights issue. This, in turn, would dilute retail holdings.
How low will it go?
A minimum price floor of N0.20 means that the stock still has some way to decline.
About the company
First Aluminum Nigeria Plc was incorporated on August 20, 1960, as Alcan Aluminum of Nigeria Limited, a subsidiary of Alcan Aluminium Company of Canada.
The name of the company was changed to First Aluminum Company (Nigeria) Limited when it became a subsidiary of Alucon Holdings SA, a wholly owned subsidiary within the Inlaks Group, based in Monte Carlo.
On May 10, 1991, the company changed its name to First Aluminum Company (Nigeria) Plc and on July 23, 1992, to First Aluminum Nigeria Plc. It became a quoted Company on 5 November 1992.