BOC GASES PLC; SINGLE DIGIT BLUES

BOC Gases Nigeria PLC is having single digit profit margin blues this year when compared to last financial year's double digit all through.
According to the interim figures to June 2015 released to the stock market, BOC Gases closed the first half of 2014 year with 14.4 per cent profit margin. However, by June this it could only manage 4.83 per cent gain on each N100 sale.
This was principally because even though turnover dropped marginally from N1041.2m to N1031.5m for the period, cost of producing the goods sold rose by 23.9 per cent to N545.1m compared to N440m at the same time in 2014.
The situation was made worse by 15.2 per cent increase in administration expenses from N220.2m to N253.7m. But very helpful was the 27.8 per cent decrease in selling and distribution costs to N174.4m from N241.6m.
In the end, as finance income dropped by 43.1 per cent to N6.15m while finance cost came to N14.6m, BOC Gases profit before tax closed the half year to June down 66.8 per cent to N49.8m from N150.2m..
Unfortunately, it may be difficult to regain lost ground in the second half of the year. Yes, if the business inflow trend in 2014 is repeated, then about 53 per cent of turnover is yet to come,and distribution and selling costs were above 50 per cent accounted for, but administration expense still has 54.5 per cent to go and cost of sale was only 42.9 per cent in by June in 2014.
THUS:
* The ace is held more by impact of finance cost this year since it has taken wings of sorts.
* Something drastic may have to be done with administration  cost and even less controllable cost of sale if single digit blues is to be stopped.

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