National Salt of Nigeria (NASCON) plc, the company that refines, produces, and markets washing salt in Nigeria, has succumbed to the currency volatility as first quarter profit declined by 14.47 percent.
Profit was N473.21 million in the first quarter of 2015, compared with N553.32 million the previous year, the Lagos-based company said in an e-mailed statement on Thursday. Sales increased 6.69 percent to 2.87 billion.
The company has been grappling with tough operating environment bedeviling companies in Africa largest economy, Nigeria, as it recorded a 19.43 percent drop in net income last year, data compiled by BusinesssDay show.
The slowed growth in the company’s performance could be attributable to the naira volatility as they import most of their raw material, according to Abiola Rasaq of the Research and Strategy Unit of Associated Discount House Limited, in an emailed statement to BusinessDay.
“This explains the high cost of production in the first quarter results of the company. Also, some other competitors are also coming on board or entering into the market, thereby intensifying competition and thus diluting the company’s monopoly,” he said.
Nigeria central bank scrapped its bi-weekly currency auctions on in February 2015, and the market body said it would sell dollars only at N198, a move that amounts to a de facto devaluation of Nigeria’s currency.
NASCON’s cost of sales increased by 21.11 percent to N1.95 billion in Q1 2015, from N1.61 percent in Q1 2014. Cost of sales margin increased to 67.94 percent in 2015 as against 59.85 percent, which means the company is spending more on input costs to produce each unit of products.
Gross profit reduced by 14.83 percent, which means the company is not efficient in managing direct costs attributable to projects. Gross profit margin fell to 32.02 percent in 2015 as against 39.77 percent in 2014, as huge energy costs hurt bottomline.
Net margin, a measure of profitability and efficiency, reduced to 16.48 percent in 2015 from 20.57 percent in 2014.
Analysts say the political unrest or insecurity in the Northern part of the country caused by the Boko Haram insurgents is majorly responsible for the dwindling performance of National Salt as it generated 40 percent of its revenue from the North.
The Boko Haram sect has been pushing violently for Islamic rule in Africa’s largest economy Nigeria, a campaign that has claimed at least 13000 lives, according to Amnesty International.
National Salts controls up to 65 percent of the market but faces stiff competition that could reduce its dominance.
Data from Report Linker, an online market research firm, show that the global salt demand would climb 2.9 percent annually through 2015 to 327 million metric tons, valued at $13.6 billion.
NASCON has N13.54 billion in assets, while market capitalisation was N21.20 billion. Its share price increased by 1.50 percent closed at N8.12 1.30pm on the floor of the NSE.
BALA AUGIE
