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Business News

Sticky cost structure mars Nascon Allied Industries’ profit margins

NASCON’s Q1:2019 financial result showed some marginal improvement as its revenue grew by 0.77% to N6.82 billion relative to N6.78bn in Q1:2018.

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NASCON’s Q1:2019 financial result

Flattish Growth amidst Mixed Sales Performance: NASCON’s Q1:2019 financial result showed some marginal improvement as its revenue grew by 0.77% to N6.82 billion relative to N6.78bn in Q1:2018. The company recorded impressive growth in its Western and Eastern markets’ sales, which rose by 47.26% and 12.74% respectively.

The recorded growth was driven by its diversification to corporate clients rather than retail customers. However, sales from its Northern market, which currently accounts for 58.90% (vs 69.90% in Q1:2018) of revenue, declined by 15.90% (N4.01 billion vs N4. 73 billion).

The company has resumed vegetable oil production at its Ota Plant with locally-sourced crude palm oil. It is planning to resume tomato paste production by the end of Q2:2019. In the near term, we expect these collective factors coupled with the location of its new 250,000mt salt factory at Apapa, which gives it access to industrial salt users in the region, to steer topline growth, as such we maintain our revenue forecast of NGN27.05bn in 2019FY, a growth of 5.00% over 2018FY.

Steady Increase in Cost of Sales Stifles Profitability: Profits margins remain strained, largely due to the mounting cost of sales which rose by 8.38% (N5.09 billion vs N4.69 billion in Q1:2018). The minimal increase in revenue did not impact the cost to sales as it weakened to 74.46% (vs 69.42% in Q1:2018).

We note that the cost of raw materials rose by 4.69% due to the company’s exposure to foreign exchange rate and other associated costs. Operating expenses also maintained its upward trend, rising by 9.57% while the OPEX to Sales settled at 10.70%. Accordingly, gross profit and net profit dropped by 16.49% and 34.59%, settling at N1.73 billion and N0.69 million, respectively.

Drop in Net Margin Dampens ROE: Return on Equity settled lower at 32.19% in Q1:2019 (vs 44.86% in Q1:2018). Although asset turnover and financial leverage declined to 0.84 and 2.46 (vs 0.87 and 2.49 in Q1:2018) respectively, much of the pressure came from the weak net margin, which dipped to 15.69% from 20.64% a year ago. In line with our expectations of higher revenues, we forecast a marginal increase of 2.41% in the company’s 2019FY net profit to N4.02 billion from N3.93 billion in FY 2018.

Recommendation: The company’s performance is in line with our projections, as such, our expected EPS and target PE are unchanged at NGN1.52 and 11.75x respectively, which leaves our target price for Dec 2019 at NGN17.86. This gives an upside potential of 5.06% to its closing price of NGN17.00 on May 23, 2019. We, therefore, recommend a HOLD.
Company.

Sigma Pensions


Contact Information
Brokerage and Retail Services
[email protected] (+234 905 569 0627)
[email protected] (+234 708 000 7861)

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Business News

FG to distribute 10 million LPG gas cylinders in 1 year

The FG is set to inject up to 10 million gas cylinders into the market to help improve safety and deepen cooking gas utilization.

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The Federal Government has announced plans to inject 5 to 10 million Liquefied Petroleum Gas (LPG) cylinders into the market in the next one year.

This is to help improve safety and deepen LPG (otherwise known as cooking gas) utilization across the country.

This disclosure was made by the Programme Manager, National LPG Expansion Implementation Plan, Mr Dayo Adeshina, at a sensitisation workshop on LPG Adoption and Implementation for Industry Stakeholders, on Wednesday in Lagos.

According to a report from the News Agency of Nigeria (NAN), Adeshina said the National LPG Expansion Implementation Plan, domiciled in the Office of the Vice President, was committed to achieving Nigeria’s target of 5 million Metric Tonnes of LPG consumption annually by 2027.

What the Programme Manager for LPG Expansion Implementation Plan is saying

Adeshina said, “The Federal Government is working towards injecting five to 10 million cooking gas cylinders into the market within the next one year. We are starting the cylinder injection under the first phase in 11 pilot states and FCT, with two states from each of the geopolitical zones.

The states are Lagos, Ogun, Bauchi, Gombe, Katsina, Sokoto, Delta, Bayelsa, Ebonyi, Enugu, Niger and the Federal Capital Territory. The cylinders will be injected through the marketers. The marketers will be responsible for the cylinders and the exchange will take place in homes and not in filling stations.

What this means is that going forward, cylinders will not be owned by individuals but by the marketers who will ensure that they are safe for usage.’

Adeshina pointed out that apart from household consumption, the government was trying to increase LPG usage in agriculture, transportation and manufacturing adding that this will enable the country to reduce CO2 emission by about 20% and create millions of jobs for Nigerians.

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He said that the government had also granted waivers on importation of LPG equipment and removed Value Added Tax (VAT) on LPG in addition to investment in infrastructure.

The President of the Nigerian Liquefied Petroleum Gas Association, Mr Nuhu Yakubu, said efforts should be made to ensure the availability, accessibility and affordability of cooking gas in the country adding that this would encourage more Nigerians to embrace gas usage in their homes with the attendant benefits to the country.

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Mr Olalere Odusote, Lagos State Commissioner for Energy and Mineral Resources, said the population of Lagos makes it imperative for residents to adopt cleaner energy sources for cooking, transportation and power generation adding that the government was targeting the conversion of 45% of about 4 million vehicles in the state to autogas over a four-year period in partnership with marketers.

What you should know

  • It can be recalled that the Federal Government had in November 2020, announced plans for the conversion of cars to autogas in a bid to have cheaper and cleaner energy especially with the high cost of petrol.
  • The government at different levels are pursuing cleaner energy sources for cooking, transportation and power generation.

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Business

JAMB bans use of email by candidates for UTME, DE registration

JAMB has announced that candidates for the UTME and Direct Entry will no longer be required to provide their email addresses at the point of registration.

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The Joint Admission and Matriculation Board (JAMB) has announced that candidates for the Unified Tertiary Matriculation Examination (UTME) and Direct Entry will no longer be required to provide their email addresses at the point of registration.

The new adjustment is to protect candidates from various forms of manipulation and distortion of their personal details by some fraudulent cyber café operators.

The Registrar of JAMB, Prof. Is-haq Oloyede, who made the disclosure while addressing newsmen at the board’s headquarters on Wednesday in Bwari, Abuja, said the change, would take effect from Thursday, April 15, 2021.

What the JAMB Registrar is saying

Oloyede said, “They gain access to profiles of these candidates under the pretense of creating an email address for them. Then they change and block the candidates from receiving messages from the board. They also extort them after they change their passwords.

In view of this, the board has come up with adjustments to our operations. The first decision is that beginning from Thursday, April 15, candidates would no longer be required to provide any email address during registration from this year onwards.

It is by going to these cyber cafes to open emails that these candidates are open to abuse and stealing of their personal data,’’ he said.

He said that the board now had a mobile app that would allow candidates to deal directly with the board with their smartphones or via SMS to ‘55019’ code option.

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The code option, he explained, would allow candidates to check admission status as well as all other verifications via SMS.

He said, “Printing of examination slips, results notification or raising tickets can be done anywhere by using candidates’ registration number only. However, at the close of registration every year, we would need the email addresses of the candidates so we can have access to as many of them as possible.

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At the conclusion of registration, candidates are expected to send their email addresses through the mobile app or text message to the 55019 code twice, for validation. This is to update their profile with JAMB as the email will no longer be used as access to their profile, but rather as a communication tool with candidates.’

While advising candidates to guard their phones with utmost care as it was the weapon for all transactions, Oloyede said that henceforth, all JAMB owned Computer-Based Tests (CBT) centres across the country, would only allow candidates with ATM cards into its centres.

He said that in order to cut down on the activities of fraudsters who hijack candidates to extort money from them, the centres would no longer allow candidates go outside the centres to pay for their e-pins and other cash transactions.

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The JAMB Registrar said, “Only candidates with ATM cards will be allowed into all JAMB owned CBT centres, it can be that of their parents as long as they have the pin for the transaction.

“Those without ATM cards can go to other privately owned CBT centres where they can pay cash to register but we will not take cash or transact outside our centres.’’

What you should know

Meanwhile, in a related development, JAMB had said that the board lost over N10 million in 2020 to activities of fraudsters who penetrated their payment portal for ad-hoc staff.

The JAMB Registrar said that the money, which was meant to pay JAMB ad-hoc staff from the 2020 Unified Tertiary Matriculation Examination (UTME), was hijacked by the suspected fraudsters.

JAMB had a few days ago confirmed the commencement of registration for the 2021 UTME/DE examinations after the initial hiccup.

It stated that applicants must provide NIN at the point of registration with the registration by Direct Entry candidates to run concurrently with that of UTME candidates.

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