CCNN: Another year of doubling profit

Cement Company of Northern Nigeria (CCNN) raised after tax profit more than one and half times last year and the cement producing company is again maintaining the high speed growth for the current year. Major cost moderations recorded last year reinforced a strong growth in sales revenue and boosted profit capacity. This year, key cost lines have proceeded from a slowdown to a decline, raising profit margin further.

The breakout performance reflects a new force in sales revenue after several years of stagnation. From a moderate recovery in the prior year, the company saw a top revenue growth record of 39% to N19.59 billion in 2017. It hasn’t seen that level of sales revenue growth any time since the beginning of the present decade.

The company is running with the new strength this year with a sales revenue growth of 24% year-on-year to N5.39 billion at the end of the first quarter. Revenue growth is expected to step up further as economic activity gains momentum in the course of the financial year.

Despite the general economic difficulties, demand for building materials has been quite strong since last year. The sector is usually one of the few that pick up ahead of others once economic recovery begins to take root. The operating advantage of cement producers lies in the ability to pass on increased costs to consumers, who adjust to price increases faster than in many other sectors.

Cost of sales slowed down relative to sales revenue at an increase of 15% in the first quarter compared to the 24% growth in sales. The cost per unit of sales therefore declined from 63 kobo in the same period last year to 58 kobo at the end of the first quarter. That enabled the company to achieve a 39% rise in gross profit year-on-year to N2.26 billion.

Profit performance was further boosted by other income, which grew more than nine times to N117 million as well as declines in three major cost lines. These include selling/distribution expenses – which declined by 5.4% to N246 million, administrative cost – which went down by 9% to N598 million and finance expenses – which dropped by 24% to N32 million over the review period.

The company closed the first quarter trading with an after tax profit of N1.08 billion, rising a clear 111% year-on-year. This indicates that profit capacity has improved further in the current year with net profit margin up from 16% at the end of 2017 to 20% in the first quarter.

Improved profit margin reflects growing sales revenue and moderating/declining costs. This has positioned CCNN for another outstanding profit growth in 2018. The company had closed last year’s operations with an after tax profit of N3.22 billion – the first major profit growth after its profit fell by 37% in 2015.

The company earned 86 kobo per share at the end of the first quarter against 41 kobo in the same period last year. It ended 2017 operations with earnings per share of N2.57 and gave out N1.25 per share to shareholders in cash dividend. Qualification date for the dividend is 15th June while payment is scheduled for 29th June, 2018.