Vitafoam Plc, the company that makes and sells foam products said profit increased 11.87 percent despite security challenges in the north part country and weak consumer spending stunting growth of manufacturers in Africa’s largest economy.
For the year ended 30 September 2014, profit was N435.60 million, compared with N389.37 million the previous year, the Lagos-based company said on the website of the NSE.
Sales increased 9 percent to N16.71 billion as the company projects a revenue increase of 20 percent on an annual basis.
Earnings per share EPS jumped to 63k in 2014 as against 51k in 2013.
The impressive results mean Vitafoam have overcome macroeconomic challenges bedeviling manufacturers though analysts say tough times lies ahead for the foam maker as hike in transport costs due to fuel shortages will dampen consumer spending.
Nigeria’s consumer inflation rose to 9.0 percent year-on-year in May, the upper end of a central bank target, from 8.7 percent in April, marking the highest rate since May 2013, the national statistics office said.
Vitafoam’s cost of sales reduced by 3.24 percent to N11.31 billion despite production losses incurred due to persistent terrorism activities in the Northern region.
Cost of sales ratio decreased to 67.68 percent in 2014 from 69 percent in 2013. This means the company is spending less to produce each unit of product.
The company’s net margin was as low as 2.60 percent in the period under review as the devaluation of the naira that causes imported inflation and huge energy costs continues to spiral production costs hence swallowing most of sales and operating profit.
Analysts say the naira devaluation exposes manufacturers to currency risk.
“We imagine that most of these firms will struggle to survive daunting pressure on costs, occasioned by the naira volatility and the pass-through impact of naira depreciation,” confirmed Saheed Bashir an analyst at Meristem Securities Ltd, in a response to questions.
Nigeria central bank scrapped its bi-weekly currency auctions in February 2015 and said it would sell dollars only at the interbank near N198, a move that amounts to a de facto devaluation of Nigeria’s currency.
The naira has lost more than 13 percent of its value against the dollar in the past six months, and was trading 0.2 percent stronger at 199 a dollar by 3:47 p.m. in Lagos.
Vitafoam’s current ratio, which measures the ability of a firm in meeting short term obligation as at when due jumped to 1.05 times in 2014, compared with 1 time the previous year.
The 1.05 times is lower than the industry average of 2.1 times.
The company’s total assets were up by 18.10 percent to N11.98 billion in 2014 as against N10.14 billion the preceding year.
Vitafoam’s share price closed at N5.38 on the NSE while market capitalization was N5.28 billion.
BALA AUGIE
