GREIF Nigeria Plc, a company that manufactures steel and plastic products has recorded a remarkable improvement at the bottom line as full year 2014 profit surges amid operating challenges stunting growth of manufacturers.
The audited financial statement for the year ended December 2014 showed profit after tax increase by 42 percent to N43.44 million from N30.62 million the same period of the corresponding year (FY) 2013, while sales reduced slightly by 1 percent to N787.58 million.
Analysis by BusinessDay shows that bottom line was bolstered by a percent reduction in income tax expense by 42 percent to N14.58 million compared with N21.84 million the preceding year.
The iron and steel industries has been in state of comatose as the cost of electricity, which is a major challenge is high in Nigeria compared to other countries.
This electricity costs has impacted on GREIF’s production costs as cost of sales ratio was as high as 82 percent, which means the company spent N0.82 for every N1 of sales it generated.
“The economy continues to be challenging for many manufacturers and industries in the real sector,” said Louis Wentzel, chairman of the company in note to shareholders at the annual generation meeting.
“Lack of adequate supportive infrastructure, persistence in erratic power supply even after privatization of the electricity distribution,” said Wentzel.
Analysts also identified other challenges bedevilling operators in the sector as mass importation of iron and steel materials as well as high tariff.
The importation of these materials rather being produced locally exposes the country to the risk of building collapses due to inferior being brought into the country.
Analysts say this importation can cause unemployment as factories will close up and lose of foreign and brain drain which also it could lead to loss of foreign exchange earnings as these products can be exported.
Nigeria imports about 17 million tonnes of steel yearly and produces only 2.5 million tonnes locally according to a report by the ministry of Mines and Steel.
“A mix of unfavourable tariff rate increase in cold rolled and flat steel sheets and increased misinterpretation of shipments/consignment values chargeable for various relevant duties and tariffs by relevant government inspection agencies and shipping companies at the port, contributed to increased cost of ownership of consignments,” said the company’s statement.
Further analysis of GREIF 2014 audited financial statement showed net margin, a measure of profitability and efficiency increased to 43.44 percent from 30.62 percent the preceding year.
The company is effectively deploying the resources of shareholders in generating high profit as the return on equity (ROE) increased to 12.88 percent in 2014 from 9.59 percent the preceding year while the return on average assets (ROA) moved to 6.54 percent as against 4.41 percent the preceding year.
Current ratio, a measure of liquidity was 1.72x, which means current assets covers current liabilities 172 times a figure that is lower than the 200 percent industry average.
“The worldwide global steel demand in the market place was stable. We experienced moderate pressure in our supply chains with overall world price stability in our basic raw materials,” said the company statement.
GREIF’s share price closed at N12.08 on the floor of the exchange while market capitalization was N515.1 million.
BALA AUGIE
