Nascon Allied Industries Plc’s second quarter surge in net income came from a growth in its seasoning business as the company plans to roll out new products before the end of the year with a view to increasing shareholders’ value.
Nascon Allied, the company that produce salt, vegetable oil, tomato paste, and seasoning products, said the new products will underpin turnover, profitability, and ultimately increase the return on shareholders’ investment.
For the first six months through June 2017, the company’s net income rose 53.54 percent to N1.95 billion from N1.27 billion as at June 2016.
Sales spiked by 48.25 percent to N12.72 billion thanks to the contributions from the seasoning business as difficult operating environment hindered the firm from sourcing raw materials locally.
The company is facing challenges sourcing sufficient raw materials locally to feed two of its manufacturing plants as crude palm oil and triple tomato concentrate are among the items excluded from the official foreign exchange window.
Despite the aforementioned challenges, the company remained efficient as net margin increased by 0.50 percentage points to 15.31 percent in June 2017, from 14.80 percent the previous year.
Similarly, return on equity (ROE), rose to 23.95 percent in the period under review from 18.40 percent as at June 2016. Return on assets (ROA) moved to 8.05 percent in June 2017 as against 6.60 percent the previous year.
Investors are confident that the company’s expansion plans that have driven profit will magnify their earnings as they continue to buy into the company’s equity.
Nascon Allied shares have gained 53.18 percent since the start of the year, outperforming the Nigerian Stock Exchange All Share Index (ASI) that gained 46.67 percent year-to-date.
The company has zero debt in its capital structure. This means the chance that it will go bankrupt is zero.
However, a zero debt position means the company will miss out on the tax benefits associated with borrowing as cost of capital will be high, depressing earnings per share.
Analysts say there is positive prognosis for Nascon Allied as it can tap into a $140 billion robust Sub-Saharan African market.
Nigeria’s young population that crave for consumption offers tremendous opportunities for manufacturers to tap into and grow sales and increase market share.
The company plans to build more salt refineries across the country in order to increase production and meet local demand.
According to Sani Dangote, vice president of the Dangote Group, Nigeria spent a $700 million to import 90 per cent of salts her citizens consumed annually.
Nascon Allied shares gained 1.64 percent to close at N13.02 when trading ended on the NSE on Monday, valuing it at N34.49 billion.
BALA AUGIE
