First Aluminium plc’s, a Nigerian manufacturer of roofing sheets, half-year (HY) profit surges 57 percent amid operating challenges inhibiting the growth potentials of players in the industry.
For the first six months through June 2014, the company’s net income spiked by 57 percent to N21.32 million from N13.54 billion recorded in the corresponding period of HY 2013.
Net margin, a measure of profitability and efficiency, rose to 4.80 percent in HY 2014, compared with 3.3 percent as of HY 2013, which analysts say is low compared with other sectors.
The low margins could be attributable to high import duties on raw materials brought into the country, thus burgeoning material costs.
Additionally, the spiralling energy costs was fuelled by the use of diesel oil, which is used to power plants for the purposes of productions as electricity from the grid is unstable.
However, some analysts say the local manufacturer should use gas, which is a cheap alternative source of energy compared with fuel oil.
First Aluminium’s cost-of-sales margin remained flat at 90.90 percent, as cost of sales increased by 6 percent to N4.017 in HY 2014 from N3.77 billion as of HY 2013.
The company was able to manage direct cost attributable to projects as gross profit rose by 26.47 percent, to N430 million as against N340 million the preceding year.
The worrisome challenges in the aluminium industry, which industry operators say may lead to same situation in the textile industry that is presently in a state of moribund.
The unfair competition from China is also undermining the Nigeria aluminium industry growth as it encourages mass importation (some say dumping) of the products into the country.
Despite the aforementioned factors inhibiting top-line growth, First Aluminium’s turnover moved by 6 percent to N4.44 billion in 2014, compared with N4.11 billion the preceding year.
Businesses need tax breaks, according to Robin Nevielle, managing director of First Aluminium plc, during an interview with BusinessDay reporters.
“We are burdened with the problems of taxation and custom officials who demand extra duties from us,” said Nevielle, saying “the labour cost is going up year in year out and the delays at the ports also worsen the situation.”
He went further to say that the harsh operating environment had left the company with no choice than to lay off workers. Total assets reduced by 10.40 percent to N8.35 billion in HY 2014, from N9.32 billion the preceding year.
Return on average equity (ROAE) was 2.26 percent, while the return on average assets (ROAA) stood at 1.10 percent.
The company’s share price closed at N0.50 on the floor of the Nigeria Stock Exchange, while market capitalisation was N1.05 billion.
BALA AUGIE
