Introduction
Our analysis of NASCON Allied Industries Plc’s current financial report shows that it had a good year in 2023. It was able to step up the level of its business activities as shown by a growing turnover base. It was also able to increase profit during the course of the year. Profitability ratios for the year were a progression over the preceding year’s. Profit margin improved, as did return on assets, return on equity, and pre-tax profit per employee.
Growth indices
For its 2023 financial year, NASCON recorded a measure of growth in all of its major parameters. First to grow was the company’s gross earnings. Gross earnings for the year stood at N80.83 billion, 37.5 percent higher than the N58.79 billion recorded in the preceding year. This 37.5 percent growth rate is as compared to a higher growth rate of 76.7 percent in 2022.
Because direct costs grew at a slower pace than turnover did, gross profit grew by as much as 80.6 percent to N44.32 billion. After deducting operating expenses from the gross profit and adding other income (including interest income), NASCON was left with a pre-tax profit of N20.59 billion, a whopping 146 percent higher than the N8.37 billion pre-tax profit recorded in the erstwhile year. This 146 percent growth rate is as compared to a pre-tax profit growth rate of 97.4 percent in the preceding year.
After-tax profit (which was also the same as distributable profit) grew over the preceding year’s by as much as 151 per cent to N13.73 billion.
Total assets for the year stood at N83.59 billion, up from N55.53 billion in 2022 and translating into a 50.5 percent growth rate. Total liabilities also grew by 53.8 percent to N56.12 billion from N36.49 billion while shareholders’ funds grew by 44.3 percent to N27.47 billion from N19.04 billion in the erstwhile year.
Profitability ratios
For the year, operating margin (which calculates what proportion of turnover is used to finance operations) was 29.3 percent, a little higher and therefore worse than the 25.8 percent that was recorded in 2022. What this means is that the probable margin for NASCON to be profitable reduced slightly during the course of the year.
Despite this, the profit margin for the year increased. Profit margin for 2023 stood at 25.5 percent, higher than 14.2 percent in the preceding year. What this means is that N25.50 made it to the profit position for every N100 earned in 2023, up from N14.20 in 2022.
Return on assets (ROA) followed the same pattern. ROA for the year increased to 24.6 percent from 15.1 percent in 2022, meaning that every N100 worth of assets deployed contributed N24.60 to the pre-tax profit for the year, higher than the N15.10 recorded in 2022.
Also, return on equity (ROE) grew to 50.0 percent from 28.7 percent, meaning that every N100 worth of equity employed contributed a massive N50.00 to the after-tax profit in 2023, up from N28.70 in the prior year.
Our examination of this company’s profitability ratios shows that the company recorded quite a profitable year in 2023, which was not the case for many other manufacturing companies in Nigeria.
Staff matters
In terms of staff matters, the conglomerate did quite well for the year ended December 31 2023. On the average, each employee contributed N30.59 million to the company’s pre-tax profit, commendably up from N14.19 million in the prior year.
To this end, NASCON reciprocated by increasing its staff cost per employee. On the average, wages and salaries earned by each staff increased to N5.59 million during the course of the year, up from N4.04 million in the preceding.
It is however worthy of note and laudable that despite increasing average staff costs, the company did not actually put itself out more than was necessary. Staff costs as a proportion of turnover was about 4.6 percent.
Other ratios
For the year, NASCON’s short-term assets increased to N67.4 billion while its short-term liabilities increased to a collective N49.7 billion. The interplay between these two had an upping effect on its current ratio. At 1.4 times (higher than 1.3 in the preceding year), current ratio was on par with industry standards. What this means is that for every one Naira of short-term obligations, the company had N1.40 in short-term assets, and was more than able to meet obligations as at when due.
The company had a debt-to-equity ratio of 2.0 and this shows that the company is using N2.00 of liabilities in addition to each N1.00 of stockholders’ equity. In other words, the company is using N3.00 of total capital for every N1.00 of equity capital.
NASCON Vs Dangote Sugar: NASCON better
Not only is NASCON’s 2023 annual results laudable in its own stead; the company’s results also competed very well against competitors in the food/beverages & tobacco sector for the 2023 FY. We compared its results with that of its sister company, Dangote Sugar (both companies are subsidiaries of Dangote Industries), and NASCON came out on top, even though it is the smaller of the two companies in terms of volume of sales.
Turnover growth rate
For the 2023 financial year, Dangote Sugar had a turnover growth rate of 9.5 per cent, as compared to NASCON’s turnover growth rate of 37.5 percent for the same period under review. Analysis shows that NASCON was the winner in this respect.
Pre-tax profit growth rate
While Dangote Sugar had a negative pre-tax profit growth rate of 230.8 percent (meaning that pre-tax profit dipped instead of growing), NASCON had a positive 146 percent growth rate. NASCON was thus the winner in this respect.
Profit margin and returns
For the 2023 financial year, pre-tax profit margin (which measures a company’s ability to squeeze as much profit as is possible from turnover) for Dangote Sugar was negative 24.3 percent, worse than NASCON’s pre-tax profit margin of 25.5 percent.
Analysis shows that while every N100 worth of equity deployed by Dangote Sugar led to an after-tax loss of N88, such N100 equity deployed earned NASCON N50 as after-tax profit.
Also, ROA for Dangote Sugar was negative 17.8 percent, down from a positive figure of 16.7 percent in the prior year. This means that of every N100 worth of assets deployed by Dangote Sugar, there was a resultant N17.80 loss. Meanwhile NASCON recorded a N24.60 pre-tax profit from every N100 worth of assets employed.
NASCON was thus the winner in terms of profit margin, return on assets and return on equity.
Conclusion
In an operating environment where most companies recorded either negative or slowed down profitability ratios, NASCON is one of the few exceptions. Its ability to not only generate sales but also to maximise profits for the 2023 financial year is indeed commendable.