March 5, 2024/Cordros Report

NASCON Allied Industries Plc (NASCON) released its 2023FY audited results yesterday (04 March), reporting a remarkable 151.0% y/y growth in 2023FY EPS to NGN5.18 (2022FY: NGN2.06). The outturn was driven by the marked revenue print (+37.5% y/y). NASCON’s board proposed a bonus issue of two (2) new ordinary shares of 50 kobo for every hundred (100) existing ordinary shares as at the close of business on 06 May 2024.
 
Topline grew markedly by 37.5% y/y in 2023FY, driven solely by income from the Salt (+41.3% y/y | 93.5% of revenue) business, while revenue from the Seasoning (-1.1% y/y | 6.5% of revenue) segment slowed. Across NASCON’s regional footprint, the Northern region (+44.8% y/y) remained its core market with the highest growth, with the Eastern (+35.3% y/y) and Western (+16.8% y/y) regions also recording growth. For context, the North’s share of total revenue increased to 73.7% (2022FY: 69.9% y/y), even as the food producer continued to lose traction in the West (20.5% of total revenue | 2022FY: 24.2%) and East (5.8% of total revenue | 2022FY: 5.9%) regions.
 
Gross margin increased by 13.10ppts to 54.8% in 2023FY, underpinned by the strong revenue growth (+37.5% y/y) as cost of sales (+6.6% y/y) increased at a moderate pace. Taking a cursory look at the cost lines revealed that the larger share was from expenses incurred on raw materials (+3.0% y/y | 85.9% of COGS) and manufacturing (+40.3% y/y | 7.7% of COGS), due to the sticky inflationary pressures.
 
As a result, margins grew stronger, as EBITDA (+10.34ppts) and EBIT (+11.34ppts) margins increased to 29.2% and 26.1%, respectively. Elsewhere, operating expenses (+56.1% y/y) printed higher, following increases in delivery expenses (+64.7% y/y) and employee costs (+65.4% y/y).
 
Net finance costs increased by 69.1% y/y, underpinned by a steep increase in interest expenses (+106.6% y/y). We highlight that the surge in finance costs was driven by an increase in NASCON’s interest on borrowings (2023FY: NGN5.49 billion | 2022FY: NGN4.79 billion). Meanwhile, finance income (+135.1% y/y) also increased markedly, driven by an increase in interest income on short term fixed deposits (2023FY: NGN927.50 million | 2022FY: NGN394.40 million).
 
Overall, PBT rose by 145.9% y/y to NGN20.59 billion in 2023FY (2022FY: NGN8.37 billion). Following a tax expense of NGN6.86 billion, profit after tax (+151.0% y/y) printed NGN13.73 billion in 2023FY (2022FY: NGN5.47 billion).
 
Comment: NASCON’s 2023FY result was remarkable as the company remained profitable throughout the year on the back of strong fundamentals. We commend management’s efforts in managing cost pressures in the face of accelerating inflation, maintaining healthy and growing margins. Going into 2024FY, although we expect sustained stellar sales performance, we highlight that the depreciation of the local currency might pose some threat to margins. Our estimates are under review.