FSDH Initial Reaction: Nascon FY23 results 
Kindly click here to download the report.

March 6, 2024/FSDH Research

Key Performance Highlights:

• After reporting blockbuster results in 9M23 (Revenue: +45.6% YoY, Profit: +282.6% YoY), Nascon reported 19.5% YoY revenue growth and +5.1% YoY net profit growth in 4Q23. Nascon Allied Industries posted a remarkable 37.5% YoY revenue growth to N80.8 billion in FY23, driven by Salt revenues (93.5% of total revenues) that increased substantially during the year with a 41.3% YoY jump to N75.6 billion. However, the revenue growth was offset by seasoning, which inched 1.1% lower YoY to N5.2 billion, and no revenues were reported for tomato paste in FY23. The topline growth was visible across all three geographies, with North growing at 44.8%, West at 16.8% and East at 35.3%. Note that Nascon’s major source of revenue during the year came from the North, at N59.5 billion, while the East was the lowest, at N4.7 billion.
   
• Comparatively, the Cost of Sales increased moderately by 6.6% YoY to N36.5 billion, resulting in an 80.6% YoY jump in Gross Profit to N44.3 billion. Consequently, the gross margins significantly expanded to 54.8% in FY23 from 41.7% a year ago. The increase in the cost of sales was underpinned by moderately higher raw material costs, manufacturing expenses and employee costs.
   
• Nascon exhibited solid operating performance in FY23, with Operating profit surging 143.2% YoY to N21.0 billion compared to N8.7 billion in FY22. Operating margin increased to 26.1% from 14.8% in FY22, primarily due to elevated topline growth, partly offset mainly by higher Distribution costs and Administration expenses. While Delivery and branding expenses formed the major portion of Distribution costs, admin expenses were heavily dominated by increased Employee Costs in FY23. EBITDA shot up to N23.6 billion from N11.0 billion in FY22, and EBITDA margin increased to 29.2% Vs. 18.8% a year ago.
   
• The higher Interest on borrowings of N1.4 billion was partly offset by Interest income of N927 million on short-term fixed deposits. Further, the tax expense increased to N6.8 billion compared to N2.9 billion in FY22. Profit for the year substantially increased to N13.7 billion from N5.5 billion a year ago, up 151.0% YoY. The Company reported a remarkably higher EPS of N5.18 in FY23 compared to N2.06 in the previous year.
   
• Looking at the 4Q23 performance, revenues were up 19.5% YoY to N21.7 billion, driven by East and North regions, up 3.7% and 30.9% YoY, respectively. In comparison, the West region experienced a 12.6% YoY revenue decline in FY23. Gross Profit significantly increased to N12.0 billion from N9.0 billion in 4Q22, while gross margin expanded by 531 bps YoY to 55.2%. Operating profit increased 4.8% YoY to N4.4 billion, and EBITDA grew 7.0% YoY to N5.1 billion in 4Q23. However, EBITDA and Operating margin were down 275 bps and 283 bps YoY to 23.6% and 20.2%. Net profit for 4Q23 increased 5.1% YoY to N2.7 billion.
   
• In FY23, Nascon Allied Industries declared an interim dividend of N 1.00 per ordinary, which was approved and paid to the shareholders on November 17, 2023. Moreover, a bonus of 52,988,767.56 ordinary shares was issued for the year ended December 31 2023, to be distributed as fully paid-up ordinary shares to existing shareholders, with a record date of May 6, 2024. The proportion of new ordinary shares of 50 kobo to every hundred existing ordinary shares held by them was proposed at the board meeting held on February 27, 2024, and subject to approval at the Annual General Meeting.

Market Reaction: The investor reaction to the FY23 results was subdued as the stock declined 10.0% to N48.15, versus a 0.35% rise for the All-Share Index (5/3).

Nascon Allied Industries Plc Highlights FY23

       Source: Company Financials, FSDH