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Despite a turnaround maintenance that was expected to bolster cash flow and profitability, Notore Chemical Industries Plc is still beset by recurring operating losses caused by rising operating costs and huge debt.
The audited 2021 financial statement of the company shows it posted a loss after tax of N9.57 billion from a loss of N6.39 billion the previous year.
An accumulated loss of N34.81 billion indicates the fertilizer producer has made more net loss than profit since its existence and exposes it to technical insolvency.
It is important to note that spiraling operating expenses prevented top line impressive performance from tricking down to bottom line (sales) growth in a high inflationary environment while foreign exchange crisis balloon raw material cost.
For instance, total cost of sales of N35.92 billion is 1.12 times revenue, resulting in a gross loss of N3.26 billion.
What’s more, the company spent N1.12 on input cost to produce every N1 of its product.
In the first quarter of 2021, the CEO and board of directors were optimistic a turn around maintenance that was expected to deliver 500,000 tons of fertilizer would improve operating efficiency and underpin profitability.
“Achieving this level of production output will not only lead to significant increases in the company’s cash flows from operations, but also substantial increases in revenues annually,” said Ohis Ohiwerei.
Analysts are of the view that the company has not recovered from the coronavirus pandemic crisis which paralyzed business activities across the country and tipped the country into a recession.
Lack of efficient logistics that ensures expeditious delivery of fertilizer to farmers is inhibiting the growth of fertilizers.
There are concerns that the energy crisis responsible for sky-high diesel price has damped industry outlook and the war in east Europe has ballooned the global price of fertilizer because Russia is the largest producer of the raw material used produce the commodity.
The supply of constant natural gas, which is the main feedstock for producing urea fertilizer, has been one of the company’s key strengths, as it is in line to achieve its 1,500 MTD name-plate production capacity following its successful drawdown of the turnaround facility, which will be utilised to increase the plant’s reliability.”
Notore believes that the domestic fertiliser market is yet to reach its full potential. Furthermore, the demand for urea and compound fertilisers, such as NPK, from the West African markets and neighbouring countries bordering the northern part of the country is also quite significant.”