WARNING BELL FOR NIGERIAN ENAMELWARE.

In the first quarter to July this year, there was one warning bell Nigerian Enamelware PLC has to give attention to in other to reap better within this financial year: 38.2% increase in finance charges to N51m.

For one, it turned out to be highest growth in expense within the quarter and more importantly, for another, it could have been less.

That is, if more attention was given to liquidity management. This is because Nigerian Enamelware had to increase borrowed funds by 42.5% to N1736.6m and so, pay more in charges, while its receivables increased by 133.8% to N3118m.

Sure, with higher N731.1m working capital surplus, the company was not under liquidity pressure as such but it certainly would have borrowed less if it grew its receivables less.

It was the increase in finance costs that kept profit before tax growth at only 10.1% to N45.6m after the company had gallantly reduced its administration expenses by 13.3% to N44.4m.

Before the finance charges take, the lone pressure was from 9,21% growth in cost of sale to N608.5m ahead of 8.22% increase in core income to N719.8m.

It survived it because other income increased by 37.5% to N29.7m and of course, because administration cost went down.

Hence, due to the much higher cost of funds, Nigerian Enamelware PLC only managed to keel its first quarter profit margin at 6.08% almost at par with 6.03% previously.

NIGERIAN ENAMELWARE PLC: Mm
                           First quarter
                           2016.         2015
Total income.   749.5.         686.7
Core income.    719.8.         665.1
Cost of sale.     608.5.         557.2
Other income.    29.7.           21.6
Administration  44.4.           51.2
Finance costs.   51.0.          36.9
Profit before tax 45.6.          41.4
Working capital 731.1.      667.6
Receivables.     3118.0.    1333.5
Borrowings.      1736.6.    1218.6

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