McNICHOLS CONSOLIDATED PLC: DIRECT COST BLOCKADE.

In the three months to September 2015 direct cost pressure made a mess of profitability McNichols Consolidated PLC was poised to achieve.
According to the figures for the first quarter released recently, McNichols had good reason to end the period with higher gain per each N100 income but for the stumbling block provided by cost of sale that more than doubled.
The growth in turnover recorded, at 91.8% was good enough. Turnover closed the quarter at N753.2m compared to N392.6m previously.
But cost of sale growth made it look like water poured on the back of a duck.
Direct cost of producing the goods sold came to N616.5m representing 115.6% rise from N285.9m in previous first quarter.
Worse was the fact that the damage done could not be repaired by far lower increase in selling and administration cost and drop in finance charges recorded.
Selling and administration cost ended at N79.1m, up 29.7% on N61m by September 2014.
On the other hand finance charges declined by 32.2% to N4.56m from N6.73m
In the end, compared to the near doubling if turnover, profit before tax went up by 31% to N51.1m from N39m previously.
Hence profit margin dropped to 6.78% as against 9.93% previously.
SO:
* It is likely that the full year will end this unless a way is found to check the growth in direct cost.
* One good thing though, finance charges should continue to stay down cause more cash is on hand especially as receivables grew by only 4.13% compared to 32.1% rise in payable.

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