TUE, 26 JULY, 2022-theGBJournal| NASCON Allied Industries Plc (NASCON) published its unaudited Q2-22 financials this morning, in which the company reported a standalone EPS of NGN0.87 (Q2-21: NGN0.55), bringing H1-22 EPS to NGN1.16 (H1-21: NGN1.09). The EPS increase was driven by the sturdy growth in sales (55.6% y/y) recorded in the reporting period.
Revenue for the period grew by 55.6% y/y (H1-22: 43.0% y/y), driven by price increases instituted across NASCON’s salt products. Across its business regions, revenue from the North (68.5% of revenue) continued to be the largest contributor to total sales outturn, growing by 76.5% y/y. In the same vein, revenue from the Western (+22.3% y/y | 26.4% of revenue) and Eastern (+31.7% y/y | 5.1% of revenue) regions maintained the momentum witnessed in Q1-22.
Quarterly analysis of the number highlights the stellar performance achieved in Q2-22, as revenue grew by 33.5%, following a broad-based increase across most regions – North (36.5% q/q) and West (36.4% q/q) – save for the Eastern (-4.8% q/q) region.
Gross margin increased by 83bps to 39.0%, as the faster revenue growth muted the impact of the surge in cost of sales (53.5% y/y). On the higher costs, the breakdown provided in the financials revealed that the bulk of the increase emanated from higher raw materials costs (+62.6% y/y), highlighting the effects of higher commodity prices amid sustained FX illiquidity, and elevated inflationary pressures in the domestic economy. On an HY basis, gross margin (-618bps) compressed to 33.3%, reflecting the overwhelming pressures inherent in Q1-22.
Although EBIT margin (+77bps) increased to 12.3% (Q2-21: 11.6%), EBITDA margin (-189bps) declined to 16.6% (Q2-21: 18.5%) reflecting the 67.6% y/y increase in operating expenses. The increase in OPEX was influenced primarily by the 93.8% y/y increase in distribution costs.
Further down, the company recorded a net finance cost of NGN67.91 million in Q2-22 (vs net finance income of NGN0.97 million in Q2-21), underpinned by an increase in finance cost to NGN145.74 million (Q2-21: NGN11.86 million). We attribute the increase in finance cost to higher interest on lease liabilities which constituted the entirety of the finance cost line.
Overall, profit before tax grew sharply by 59.5% y/y to NGN1.71 billion (Q2-21: NGN1.07 billion). Following a tax expense of NGN556.87 million, profit after tax printed NGN1.15 billion (Q2-21: NGN727.33 million), translating to a growth of 58.0% y/y.
‘’NASCON’s Q2-22 result outperformed our expectations as we initially believed the company’s ballooning costs would constrain margins and hamper earnings growth, Cordros Research analysts said, adding however, that they are still cautious on their expectations going into H2-22, ‘’given that the strong headwinds we identified as growth inhibiting factors still exist.’’
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