One can expect good sales in the cable manufacturing business if the last six months of trading by Cutix plc., is anything to go by. The margins are high although backtracking even after the economy has exited recession.
Cutix Plc is a Manufacturer and Supplier of House Wiring Cables, All Aluminum Conductors (AAC), Copper Conductors, Aluminum Service Cables, Automotive Cables, Appliance Cables, Low Voltage Power Cables and Solar cables. Manufacturing and selling these products delivered to Cutix N1.86 billion, which is 25.3 percent better than the previous sales of N1.48 billion. Rising sales led to higher Cost of Sales of N1.4 billion, which is 28 percent higher than the costs of the equivalent period in 2020.
Despite the rising cost of sales, top line profit improved 19 percent as gross profit shored at N466.5 million, up from N392.2 million. Although gross profit is on the rise, gross profit margin dropped a tad to 25.1 percent from 26.5 percent, indicating that the company needs to sell more of its offerings, boost sales and up the current profit level. In short, the company needs to improve its sales strategy.
Rising costs from within the macro environment and internally allowed only a measly growth in operating profit to N234.9 million from N233.6 million, the result was a backtrack in operating profit margin to 12.6 percent from 15.8 percent. This means that the company would need to step up its game in terms of operating efficiency.
Rising operating costs and costs associated with finance ensured pretax profit rose less than 1 percent to N202.6 million but because the rise was too slow, pretax profit margin backtracked to 11 percent from 13.5 percent. Giving these languid fundamentals, net profit rose by only 5 percent to N137 million from N130.4 million, putting net profit margin at 7.4percent, down from 8.8 percent.
If anything, the result for CUTIX’ six months indicate that there is much to be done in the area of efficiency and profitability even though the company turned a profit, albeit at a slower rate compared to the equivalent period in 2020.
This affected the company’s Return on Assets and Return on Equity. While ROA dropped to 6 percent from 6.5 percent, indicating that the company is not maximizing its assets base, ROE fell to 3 percent from 3.4 percent to show that shareholders value is also not being maximized and this may affect the amount of dividend declared at year end.
As a lesson to competitors, there aren’t many of them, it will be wise to significantly ramp up sales in order to galvanise top and bottom line profits and to work on improving margins despite the slow economic conditions. This is what will ensure a bigger share of the market apart from the competitive advantage that better resources might confer.
Meanwhile, Cutix Plc has projected that in the fourth quarter of its financial year 2021, its revenue will double and profit will increase by 9% to N148 million.
These projections were made by the company in a recent earnings forecast issued by the Management, and signed by the Company’s CEO and CFO.
The earnings forecast was made on the ground that the Nigerian economy will continue improve, as the country recovers from the impact of COVID-19. In this regard, revenue in the fourth quarter of 2021 will be slightly higher than the revenue projected in the third quarter of 2021.