Enamelware, Nigeria’s maker of coating, engraving, heat treating, and allied activities, has recorded low-profit margin fuelled by increased input costs, analysis of the company’s financial statement shows.
For the first nine months to January 2015, the company’s profit after tax (PAT) increased by 11.91 percent to N67.84 million from N60.62 million the same period of the corresponding year 2014.
Sales increased slightly by 1.58 percent to N1.92 billion in the review period compared with N1.89 billion the preceding year.
Despite increased profit, the company was inefficient given the low-profit margin of 3.35 percent that was fuelled by rising production costs.
This spiralling production cost is becoming insurmountable given its impact on the bottomline of most Nigeria firms analysed so far by BussinessDay.
Enamelware’s cost of sales margin was as high as 84.30 percent, which explains the low-profit margin recorded by the company. The huge input costs also impacted on direct costs attributable to project as gross profit increased slightly by 3.91 percent to N293.50 million from N282.44 million, last year.
Firms operating in Africa largest economy have been struggling macroeconomic headwinds that are causing whirlwind given firms faltering performance.
To further exacerbate the anemic conditions of the company is the devaluation of the currency, which will increase importation of raw material consequently spiking production costs.
Enamelware’s total assets fell by 11.68 percent to N2.72 billion in 2015, as against N3.08 billion the preceding year; total equity also reduced slightly 4.83 percent to N1.24 billion.
Current ratio, which measures the ability of a firm to meet its short-term obligation, was 1.52 times which is lower than the 2 times industry average.
Enamelware is also seeking organic growth through merger and acquisition as it recently announced the acquisition of Universal Nigeria Industries Limited (UNICO) with a view to forming synergies.
The objective of this union is to diversify the basis of our operations activities, reduce cost, and make the best use of both its human and capital resources in a rapidly changing economy, like in Nigeria.
Enamelware’s share price closed at N31.82 on the floor of the exchange, while market capitalisation was N2.01 billion.
BALA AUGIE
