April 26, 2023/Cordros Report
NASCON Allied Industries Plc (NASCON) published its Q1-23 unaudited financials earlier today, in which the company reported an EPS of NGN0.62 (Q1-22: NGN0.15), following a sturdy growth in the topline (+57.1% y/y).
Revenue grew by 57.1% y/y in Q1-23. We believe the higher sales outturn in the period was supported by (1) price increases on the company’s salt products, and (2) higher volumes especially from its Northern customer base. On the higher salt prices, our channel checks reveal a 21.7% y/y increase in the price of the product over Q1-23. Across its regional footprint, the Northern region (71.8% of revenue) remained the company’s dominant region, with sales growing by 68.3% y/y. Meanwhile, the Western (22.2% of revenue) and Eastern (6.0% of revenue) regions also recorded growth of 35.0% y/y and 31.6% y/y, respectively.
Gross margin (+27.22 ppts) expanded markedly to 52.9%, driven by strong revenue growth (+57.1% y/y) and a 0.5% decline in cost of sales. Consequently, EBITDA (+768bps) and EBIT (+964bps) margins increased to 18.5% and 15.1%, amid a 72.5% y/y increase in operating expenses. We note that the significant increase in OPEX was influenced by a 83.8% y/y increase in distribution costs.
Further down, net finance cost increased significantly to NGN117.19 million in Q1-23 (Q1-22: NGN18.67 million), underpinned by a 238.6% y/y increase in finance costs. The increase in finance cost is attributable to interest paid on borrowings for the period which amounted to NGN180.40 billion (Q1-22: Nil).
Overall, profit before tax grew markedly by 328.0% y/y to NGN2.43 billion (Q1-22: NGN568.73 million). Following a tax expense of NGN791.15 million, profit after tax printed NGN1.64 billion (Q1-22: NGN386.37 million).
Comment: NASCON’s stellar Q1-23 results resonated with our expectations for the food producer for 2023FY (Click here for our full year update). We maintain our view that the resilience NASCON exhibited in 2022FY will be sustained in 2023E and support the company’s performance therein. Our estimates are under review.
