CHELLARAMS: HOPE RISING

Chances are high that Chellarams PLC will end the year to March 2016 with profit as against loss hitherto.
According to the half year figures released recently, in the two quarters, good cost control paid off well especially in the first quarter to June 2015.
Yes, turnover continued to drop in both quarters with 14.7% decrease in the first quarter snowballing into 20.1% drop by September from N13403.4m to N10714.4m.
Inspire of this, new hopes were raised as cost of sale dropped at faster rates first in the quarter yo June (by 23.7%) and later in the full half year by 22.8% to N8719.4m from September 2014's N12073.5m.
Then good grip over distribution costs bore fruits as in the first quarter. it dropped by 21.9% and then built on that to end the half year down 39.8% from N223.3m by 2014 September to N134.5m.
In the case of administration overheads, the healthy 23.1% decrease by the first quarter eased to only 17.4% drop from N1342.7m to N1109.3m by September.
The hope killer was still growing finance cost which in first quarter was 61.2% up before ending September at N744.8m, up 115.1% on the N346.2m at the same time previously.
However, this only slowed down the Chellarams recovery from the loss league. By June 2015, profit recorded was N104.8m compared to N306.1m loss previously.
By half year, N127.2m had been reported as profit before tax which works out at N1.19 gain on each N100 income as against N1.97 in the first quarter. The loss in the full half of last financial year was N453.1m.
It is still tough going though especially in managing liquidity. During the first quarter, liquidity stress had eased a little but pressure resurfaced in the second quarter leading to a slightly higher dependence on overdraft though less so when compared to September 2014 level. In other words, second quarter applied brakes on gains of the first quarter in terms of liquidity.
SO:
* Rough road not withstanding, Chellarams PLC could end the year above water if lids on cost remain effective.
* Besides, the company should reap  some benefits from the recent reduction in benchmark interest rates by the CBN.

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