Notore Chemical Plc’s balance sheet is not looking any better as the fertilizer producing company struggles to pay off bondholders, preferred stockholders and other creditors.
The interest coverage ratio for Notore Chemical stood at 0.37 at the end of 2022, which is higher than 2021’s 0.25, according to data from MoneyCentral calculations.
The figure is a measure of a company’s ability to repay its debts, with a ratio of at least 2 generally considered the minimum acceptable amount for a company with solid revenues. Analysts typically prefer a coverage ratio of 3 or higher.
The deteriorating financial health of the company who doesn’t have enough profit to service its interest expense is caused by the devaluation of the currency that balloons U.S. dollar denominated loans and elevated yields on the back of the rising interest rates as the central bank clings to a hawkish stance.
This means finance costs will continue to drain the company’s bottom line (profit).
Notore Chemical has total debt of N140.60 billion in its balance sheet in the period under review, which is 8.96 percent higher than 2021’s N129.03 billion as at December 2021.
It is interesting to note that the company has more debt than equity in its books as the debt to equity ratio stood at 234.68 percent as at December 2022 from 243.36 percent the previous year.
Nigeria’s central bank raised its benchmark interest rate by 100 basis-point to 17.50 percent, the highest level since it was adopted in 2006, as the Apex banks seek to tame rising inflation.
While Nigeria’s inflation rate surprisingly eased to 21.34 percent in December 2022 from 21.47 percent recorded in November, it is still the highest in 17 years.
Expectedly, Notore Chemical posted a loss after tax of N16.22 billion as at December 2021 as against N9.57 billion the previous year.
That led to accumulated losses or negative retained earnings of N51.04 billion as at December 2022.
The company’s revenue was up 29.14 percent to N33.19 billion as at December 2022, as the company continues to benefit from turnaround of plants that has massively led to the improvement of delivery of Urea and other chemicals amid increasing demand for fertilizer within and outside Nigeria.