Notore: low income, cost of sales worsens losses
Notore Chemical Industries, in its fourth quarter (Q4) unaudited results and accounts for the period ended September 30, 2021, reported declining revenues and increasing cost of sales to position its earnings on losses.
In addition, most financial metrics for the period showed that Agro-Alloy and Chemicals performed poorly during the year under review and this indicates that the company will not pay a dividend to shareholders anytime soon. .
The company listed on the board of directors of Nigerian Exchange Limited (NGX), known to produce fertilizers for sale in Nigeria and for export to West Africa, South Africa and Europe, has continued to record recurring losses since the last economic downturn in 2016.
The revenue performance showed that the cost of sales exceeded the revenue from contracts with customers, two major factors contributing to the difficulties of the company.
Revenue from customer contracts for the fourth quarter of 2021 fell 7.1% to N17.47 billion from the N18.8 billion reported in the fourth quarter of 2020, while cost of sales increased by 0.96% to close the fourth quarter of 2021 at N21.89 billion against N21.68 billion reported in the fourth quarter of 2020.
The revenue breakdown revealed that sales of nitrogen, phosphorus and potassium (NPK) rose to 3.35 billion naira in the fourth quarter of 2021, from 249.6 million naira reported in the fourth quarter of 2020, while as sales of urea and other chemicals fell 31.1 percent to 12.57 billion naira from 18.25 billion in the fourth quarter of 2020.
Ammonia sales closed in the fourth quarter of 2021 at 359.2 million Naira from 298.6 million Naira in 2020 and infrastructure services, for the period, added 1.19 billion Naira to revenue.
The analysis by geographic location showed that the revenue generated in Nigeria increased by almost 20% to reach N17.03 billion in the fourth quarter of 2021, compared to N14.21 billion reported in the fourth quarter of 2020, while Revenue outside Nigeria fell dramatically by 86 percent to 439.2 million naira in the fourth quarter of 2021 from 3.22 billion naira in the fourth quarter of 2021
The company argued that the low revenue is due to the fertilizer plant’s Turnaround Maintenance Program (TAM) which impacted its revenue during the year under review.
According to the group’s profit and loss figures, the growth in transport costs and infrastructure services leads to a percentage increase in the cost of sales which closed the fourth quarter of 2021 at 21.89 billion naira from 21.89 billion naira. 68 billion nairs in the fourth quarter of 2020.
As a result, the company reported a gross loss of 4.42 billion naira in the fourth quarter of 2021 compared to 2.88 billion naira in the fourth quarter of 2020.
However, the total operating expenses of Notore Chemical Industries fell 6% to 5.96 billion naira in the fourth quarter of 2021, from 6.31 billion naira reported in the fourth quarter of 2020.
According to profit and loss figures, administrative expenses fell 4.5% to N 5.74 billion in Q4 2021 from N 6.02 billion in Q4 2020, while sales and distribution expenses also fell 25.5% to N 218.79 million from N 293.7 million.
Other income fell 63 percent to 6.89 billion naira from 18.68 billion naira in the fourth quarter of 2020.
Weak revenue performance, among others, weakens operating profit which rose 9.49 billion naira in the fourth quarter of 2020 compared to an operating loss of 3.49 billion naira in the fourth quarter of 2021.
During the period, the company reported financial income of 388 million naira compared to 1.07 billion naira reported in the fourth quarter of 2020, while finance costs fell 29% to 16.7 billion naira in the fourth. quarter of 2021 compared to 23.41 billion naira declared in the fourth quarter of 2020.
In the latest fourth quarter 2021 results, the company paid 7.7 billion naira in exchange difference on bank borrowings, but in the current period this money has not been paid.
However, management paid N16.69 billion in interest and borrowing costs in the fourth quarter of 2021, compared to N15.66 billion reported in the fourth quarter of 2020.
The loss before income tax, however, closed 20.19 billion naira in the fourth quarter of 2021 against 13.9 billion naira reported in the fourth quarter of 2020. In the same vain, the company reported a loss of 20.19 billion. billion nair for the period of the fourth quarter of 2021 against a loss of 6.4 billion nair reported in the fourth quarter. 2020.
Swimming in negative territory
The group’s total debt stood at 122.18 billion naira as of September 30, 2021, an increase of 12% from the 108.35 billion naira reported for the fiscal year ended September 30, 2020.
He has also seen his debts rise very rapidly as the fertilizer marker continues to struggle with his long and short term financial obligations.
Long-term borrowing fell 12.4 percent to 78.55 billion naira from 89.67 billion naira reported in 2020, while short-term borrowing rose 133.5 percent to 43.6 billion naira. naira against 18.68 billion nair declared in 2020.
Meanwhile, the total assets of Notore Chemical Industries increased by 3% to reach 226.65 billion naira as of September 30, 2021, from 220.76 billion naira.
During the period, non-current assets grew six percent to reach N 210.34 billion as of September 30, 2021, from N98.62 billion in 2020, driven by growth of 11.3 percent and 4.1 percent of investment property and properties, factories and equipment.
Total current assets fell 26.35% to 16.31 billion naira as of September 30, 2021, from 2.14 billion naira reported as of September 30, 2020.
The group’s total liabilities increased by 16.5% to reach 183.73 billion naira as of September 30, 2021, compared to 157.7 billion naira declared in 2020.
According to the financial statements, the total equity of the chemical industries of Notore depreciated 31.9% to reach 42.9 billion naira as of September 30, 2021, compared to 63.06 billion naira declared during the previous period.
The group reported negative retained earnings of 49.35 billion naira as of September 30, 2021 compared to 29.16 billion naira.
Analysts expressed that the shutdown of the company’s plant had an impact on revenues and that management needed to increase revenues to increase profits and possibly pay dividends to shareholders.
The Managing Director of the Notore Group, Mr. Ohis Ohiwerei, said in a statement that the tireless efforts and focus of our team on plant reliability have enabled the company to maintain a daily production volume of 1,000. MT. Going forward, the focus is on maintaining current daily production volumes and increasing over the next few months to reach rated capacity.
With the current price of fertilizers exported to the world, the objective of the company is to optimize the distribution of its sales in order to cushion the increase in the cost of imported raw materials of production inputs caused by the devaluation. from naira.
The strategy is expected to keep the business profitable in the last quarter of the current fiscal year as we continue to diversify our reach into the market for both urea and NPK fertilizers.
“We expect demand for NPK Q5 fertilizer to increase as the dry season farming period approaches. We also plan to harvest, grind and package the Notore Premium brand of Phase Two pilot rice for sale during this quarter. “
He noted that beyond 2021, the company’s prospects remain to achieve nameplate production capacity while expanding the reach of urea and NPK fertilizers in the African sub-region of Africa. the West, because the company works with the governments of the region.
Commenting on the plant, company secretary, Notore Chemical Industries, Otivbo Saleh, said, “When completed, we expect a significant improvement in the plant reliability index and daily production. supported by 1,500 tons.
“Achieving this level of production will ensure improved cash flow, increased annual revenues as well as the return of the company to profitability. “
Regarding the outlook for the year, the company expects sales growth of between 25 and 30% in the last quarter of the year, reflecting the stability and reliability of the plant.