Like this:
Like Loading...
" />
Published On: Sun, Jan 29th, 2017

Beta Glass: High On Margins

Beta Glass pierced open the thick membrane of the recession and tore its way to higher profits and better margins in the third quarter of 2016 mostly by improving margins and foreign exchange gains. This indicates that it is an investment stock market players should pay attention to despite being a quiet player.
While the company ‘engaged in manufacturing and selling of glassware’ grew revenue only 15 percent from N11.52 billion to N13.3 billion owing to the slow occasioned by the recession, it almost doubled pre-tax profits in the period, jerking it 90.6 percent from N2.23 billion to N4.3 billion. The meteoric rise in Pre-tax profit suggests better management of the company’s variable costs including selling and distribution expenses as well as admin expenses. Selling and distributions costs grew less than one percent while admin expenses fell 26.3 percent. While this was modest in itself in these recessionary times, the figures were ballooned by forex gains of 384 percent to N1.87 billion from N386.4 million.
The buoy occasioned by forex translation to the company that exports its products to over 13 countries, including Angola, Benin, Burkina Faso, Cameroun, Gabon, Gambia, Ghana, Guinea, Liberia, Mauritius, Rwanda, Sierra Leone and Togo, inevitably galvanised operating profit, spiriting it by 114 percent to N4 billion from N1.8 billion.

The effect of rising operating profit was a direct improvement in operating margin to 30 percent from 16.2 percent. This is despite rising current ratio or deterioration in its ability to respond to short term obligation. The company’s current ratio worsened slightly from 1: 2.8 to 1: 2.87. Responsible for this situation is rising inventory and receivables. While inventories grew 51.5 percent to N5.3 billion from N3.5 billion, receivables were up 29.5 percent from N8 billion to N10.4 billion. The company’s cash position were up 60 percent from N4 billion to N60.4 billion, ostensibly to serve as buffer against stunted demand in the period.
Apart from the positive effects on operating margin, better operating profit also contributed to the good showing of pre-tax profits highlighted above, which translated to pre-tax margin of 32 percent from 19.4 percent. This means that for every N1000 of revenue, the company translates N320 to pre-tax profit compared to N194 achieved earlier.
The situation may have been different given the less than inspiring rise in finance income even if finance costs moderated in the period. While the company’s finance income had a 29 percent setback from N292.2 million from N413.3 million, finance costs or payments due to bank loans fell 23 percent to N38.3 million from N49.7 million.
The company was on course to more than double net profit in the quarter but for a curious and lacerating tax liability of N1.4 billion, which is 115 percent bigger than what it paid in the equivalent period in 2015. But sat N2.89 billion net profit for the period was 81 percent better than the equivalent period when it made N1.6 billion. This puts net profit margin at 21.7 percent compared to 14 percent of the equivalent period.
The company’s resilience is little surprising considering that its business is the manufacture, distribution and sale of glass bottles and containers for the soft drinks, wine and spirit, pharmaceutical and cosmetics companies, all industries that have turned out bellwethers despite the economic trough. BMI Research released in October 2016, say that alcohol consumption grew 3.2 percent in 2016 while non-alcoholic drink sales shot up 12.5 percent. Both industries are served by Beta Glass.
Year on year Beta Glass Company PLC’s net profit fell from N2.39bn to 1.99bn, a -16.70% decrease, this situation appears set to be reversed given its thirds quarter performance. But investors do not appear enthused as the last price of the company’s stock showed Friday 6th January.
Though the stock price rose 0.02k to N30.02 from N30 it traded for the day before, it is trading 69 percent less than its value a year ago. But this can easily be brushed aside as a general market phenomenon and that the stock is poised to rise with announcement of positive results for the full year especially when they consider that the company’s Return on assets was 8.8 percent in the third quarter compared to the 6 percent in the equivalent quarter in 2015 .

Kirk Leigh

%d bloggers like this: