Sustained sell pressure witnessed on shares of some blue-chip firms quoted on the Nigerian Exchange has resulted in shareholders of Chemical and Allied Products Plc (CAP) losing about N1.340 billion in a day trading.
This is despite the announcement of the company’s unaudited results for the period ended 30 June 2022 with a 78% growth of profit after tax which ordinarily would have gingered positive market sentiment on the stock.
However, Shareholders’ worries are compounded by the rising cost of sales which saw operating expenses rise to N2.326 billion from N1.367 billion in 2021, representing a growth of 70%.
Checks by Nairametrics showed that the paint company stock dropped on July 27 by 9.09% to N17.00 per share from N18.79 the previous day, July 26.
Further analysis showed CAP closed at N17.00 per share and N13.400 billion in market capitalisation on the Nigerian Stock Exchange (NGX) as against N18.70 per share and N14.740 billion in market capitalisation the previous day, hence earned a loss of N1.340 billion or 9.09%.
CAP began the year with a share price of N19.45 but has since lost 12.6% off that price valuation, ranking it 120th on the NGX in terms of year-to-date performance.
Though raw materials import with its attendant foreign exchange burden has remained a militating factor, it is not the only factor responsible for the less than sterling performance of paints manufacturers.
Other challenges facing the industry include dearth of infrastructure, especially stable electricity supply, poor road network, multiple taxation, stiff competition and high import duties and tariff, among others.
For instance, even years after the privatisation of the power sector, manufacturers are yet to see any appreciable improvement in electricity supply, forcing them to rely heavily on in-house power supply at huge cost. Yet, power constitutes the single critical infrastructure to boost the manufacturing sector and create jobs
According to market watchers, these factors contribute to the high cost of production, which is said to be responsible for the high cost of goods produced locally compared to imported ones. The cheaper price of imported goods is blamed for the penchant of Nigerians to patronise imported goods to the detriment of locally produced goods. This is why many local industries, including paints manufacturers that could not stand the heat of the competition in the same market with imported goods are fast disappearing from the industrial landscape.
In case you missed it
Chemical and Allied Products Plc (CAP) announced its unaudited results for the period ended 30 June 2022 with a profit after tax of N904 million as against N509 million representing a growth of 78%.
Profit before tax was N1.3 billion, up 91% from N697 million in half year of 2021while Gross profit 102% higher on the back of strong revenue growth and higher gross margin, up 988 bps. Revenue grew by 53% to N8,745 billion in 2022 from N5.728 billion in half year 2021.
Operating expenses rose to N2,326 billion from N1,367 billion in 2021, representing a growth of 70%.
What the company is saying
Commenting on the results, Managing Director, Bolarin Okunowo, stated: “We are excited with the results for this half year, having delivered double digit growth in revenue and triple digit growth in operating profit.
We are seeing encouraging results from recent investments in our brands and distribution infrastructure and are confident that these investments will further yield positive results as well as expand the frontiers of our business.
Inflationary cost pressures remain a key concern and we are focused on delivering operational efficiencies and taking proactive pricing actions to combat the impact of rising costs”.
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