Consumer Goods Company NASCON Allied Industries recorded its first quarterly loss N118.29m as mounting cost of sales dragged its fourth quarter 2019 result. In standalone Q4 result, the makers of Dangote salt and Dan-Q maggi recorded 6.6percent decrease in quarterly revenue to N6.54bn in fourth quarter 2019 from N7.01bn recorded in fourth quarter 2018, while cost of sales surged 6.48percent to N5.75bn in fourth quarter 2019 from N5.40 in same period in 2018.
According to analyst at Cordros securities, the fourth quarter result came as a huge surprise as Q4 is traditionally the company’s strongest quarter, coupled with NASCON’s expansion in its seasoning capacity to 5,678MT in November (from 2,900MT), a move that should have ordinarily supported volume growth in the period.
“We suspect its lower pricing strategy must have contributed to the revenue decline in the period. Beyond that, we also believe that the company cut prices in the refined salt segment in order to grow its market share,” Cordros said.
NASCON’s net finance charges expanded by 1,821.5percent year-on-year as the company expanded its debt profile with a new N3bn loan. NASCON’s exposure to
In full year from January-December cost of sales surged 20.4percent to N21.65bn from N17.98bn and 56.2percent surge in operating cost outpacing revenue growth at 7percent. Revenue from the sale of salt, seasoning, and vegetable in 2019 grew slightly to N23.36bn from N21.68bn while revenue from freight from the delivery of salt and seasoning also increased to N4.21bn from N4.08bn.
Further analysis of revenue generation by geographical location shows that it generates the most revenue from the Northern part of the country with N18.86bn while it generates N7.05bn from the west and N1.69 from the East.
Analysts believe the Q4 numbers would force management to rethink its pricing strategy.
NASCON, one of the subsidiaries of Dangote Industries Limited in 2019 announced the relocation of 60percent of its operations from its Apapa plant, an area known for heavy traffic gridlock, to Oregun and Port Harcourt.
