Chemical and Allied Products posts 24% drop in profit after tax

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Chemical and Allied Products Plc, one of Nigeria’s leading paints and decorative companies, announced its unaudited results for the nine months ended 30 September 2020.

Commenting on the performance, Managing Director, David Wright, stated:

“In the last quarter of 2019, CAP embarked on a new growth strategy focused on creating value for our shareholders and we are encouraged by the top-line growth thus far.

CAP’s performance in 2020 has been affected by COVID-19, particularly in April and May as a result of the stringent movement restrictions which constrained production and led to supply chain disruptions.

Chemical and Allied Products posts 24% drop in profit after tax

Despite the challenging operating environment, we achieved strong revenue and volume
growth of 34% and 34.6% respectively in the third quarter of the year.

Going forward, we expect to continue to see the positive effects of our growth strategy on our sales and remain focused on managing operating costs to deliver on profit ambitions in the fourth quarter.”

Financial Review

Chemical and Allied Products’ revenue grew by 3.7% Year on Year (“YoY”) to ₦6.0 billion in 9M 2020, on account of strong volume growth of 10.8% YoY despite the COVID-19 related disruptions in April and May.

9M 2020 revenue improvement was driven by a strong Q3 performance, with revenue growth of 33.7% Q-o-Q.

Gross profit of ₦2.7 billion was achieved in 9M 2020, reflecting a decline of 2.1% YoY due to input cost escalation from supply chain disruptions, inflation and currency devaluation.

EBIT for 9M 2020 is ₦1.2 billion. EBIT margins whilst strong at 19.5% represents a decline of 610 basis points YoY due to the impact of gross profit compression mentioned above, and budgeted staff cost increases driven by deliberate initiatives to strengthen the workforce.

Profit before tax of ₦1.4 billion was achieved in 9M 2020, reflecting a decline of 850 basis points on Profit Before Tax margin due to the decline in operating profit; and a 40.6% decline in net finance income due to lower investment income yields compared to the prior year.

Total profit for the period was ₦928 million in 9M 2020, a 24.4% decline from ₦1.2 billion reported in 9M 2019. Earnings per share for the period was 133 kobo, down 24.0% from 175 kobo in 9M 2019.

Operating Cash Flow for the period was ₦285 million in 9M 2020, compared with ₦424million in 9M 2019.

The company continues to maintain a strong cash position of ₦4.97 billion with a 15.0% growth in cash and cash equivalents between Dec 2019 and Sep 2020 which provides a buffer for operational requirements.

Still, we continue to evaluate various opportunities and plan to invest for growth.

Chemical and Allied Products Plc (CAP) is a leading paints and coatings company in Nigeria with globally recognised brands such as Dulux and Caplux.

The company manufactures and sells premium and standard paints and coatings and is the sole technological licensee of Akzo Nobel Coatings International B.V. in Nigeria.

The company pioneered the colour centre concept in Nigeria in 2005, which contributed to the evolution of the Nigerian paint industry.

Today, CAP has 76 colour centres and colour shops across 31 states. The company generated revenues of N8.41 billion in 2019.

CAP is a public company listed on The Nigerian Stock Exchange. It is a subsidiary of UAC
of Nigeria PLC which holds 51.49% of the company’s shares.

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