VITAFOAM NIGERIA PLC: GROWTH AND ITS PRICE

Vitafoam Nigeria PLC looks set once again to pay a price for continuing growth in turnover in spite of the times. Helped by non-core business, the group manages to grow its turnover but at a price because Vitafoam Nigeria, the company; seem more efficient.
According to the figures for the nine months to June 2015 released to the stock market, while
Vitafoam Nigeria the company barely increased its turnover, it handled its costs better.
From the figures, group turnover rose by 3.74 per cent compared to 0.55 per cent increase for the company. Note though that the company's nine months increase was a n improvement on the 3.6 per cent drop in turnover recorded earlier in the first quarter of the year.
In the case of cost management, the reverse was the case. The company's cost of sales increased by 1.49 per cent but overall growth for the group was 5.13 per cent  from N8954.9m to N9414.4m by June 2015.
The same thing occurred with administration expenses, increasing by 5 per cent for the company and 6.78 per cent for the group to N2710.6m. The gap between the growth rates was even wider by first quarter end when group administration expense rose by 16.3 per cent compared to 0.72 per cent for the company.
As for finance charges, the trend was the same.  By June the growth reported by the company was only 2.23 per cent while that of the group was 11.8 per cent. In both instances, the pressure from finance charges increased when compared to first quarter of the financial year.
In the end, Vitafoam Nigeria PLC group profit margin (gain on N100 sale) closed June 2015 at 3.77 per cent, down considerably on the 5.65 per cent by June 2014 and even on the 5.44 per cent by the close of first quarter.
IN SUM:
* Growth in turnover may have continued to financial year end last month but don't expect profitability ahead of 2014 levels.
* Dividend could still be declared but that will depend on the group's cash flow and board of directors perception of the state of affairs with the group and the Nigerian economy.

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