Bottler maintains growth momentum as earnings rise 16.13%

Seven-Up Bottling Company plc has maintained its growth momentum for the third consecutive period as third quarter (Q3) 2014 profit surged by 16.13 percent, analysis of the financial statement shows.

Seven-Up Bottling Company plc has maintained its growth momentum for the third consecutive period as third quarter (Q3) 2014 profit surged by 16.13 percent, analysis of the financial statement shows.

For the first Q3 to December 31, 2014, the company’s profit after tax (PAT) increased by 16.13 percent to N4.54 billion from N3.91 billion the same period of the corresponding year of Q3 2013, while sales increased by 8.88 percent to N59.83 billion.

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The bottling company has been recording unprecedented growth since 2013 financial year. It also means the company is tapping into the Nigerian growing population and burgeoning middle-class with higher disposable income that crave for consumption.

Analysts attribute the growth at both top- and bottom-line level to focus strategy, effective costs control mechanisms and aggressive market penetration. They also add that the country’s demographic dividend is another driver of growth for the company.

The country has a median age of 19 years, and 55 percent of the population is within the age bracket of 16 to 65 years. This means a lot of people are taking soft drinks to quench their thirst.

These impressive results are coming amid tough operating environment bedevilling most firms in Africa largest economy, Nigeria.

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Bottlenecks such as bad roads that swell distribution costs, high diesel costs that culminate in huge overhead costs and insecurity challenges in the North part of the country debilitate the growth prospects of firms operating in the country.

As a result of the aforementioned challenges that spiral costs of firms in Nigeria, Seven Up’s input costs increased as sales of ratio reduced moved to 62.75 percent in 2014 from 60.01 percent the preceding year, while cost of sales were up by 15.33 percent rose to N37.14 billion.

However, operating expenses remained flattish at 15 billion while operating expenses margin reduced to 25.46 percent in 2014, as against 28.08 percent last year.

Direct cost attributable to projects slightly improved as gross profit jumped by 4.75 percent to N22.68 billion compared with N21.65 billion, while gross profit margin fell to 37.90 percent in 2014 from 39.39 percent the preceding year.

The company has huge debt in its capital structure as debt ratio was as high as 87.09 percent, though a reduction from 91.50 percent the preceding year.

This means that the large chunk of the company’s balance sheet is funded by borrowers’ money.

Additionally, finance costs spiked by 53.84 percent to N1.80 billion as against N1.17 billion the preceding year, while total borrowings spiked by 11.97 percent to N17.68 billion.

Seven Up’s total assets were up by 10.02 percent to N61.46 billion in 2014, as against N55.86 billion the preceding year.

Current ratio, which measures the ability of firm to its short-term obligation reduced to 1.28x from 2.03 last year, though lower than the 2.1x industry average.

The company’s share price closed at N157.20 on the floor of the exchange, while market capitalisation was N100.70 billion.

February 8, 2015; http://businessdayonline.com/2015/02/bottler-maintains-growth-momentum-as-earnings-rise-16-13/#.VNmDRi7Fy94

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