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Wednesday, March 29, 2023

CAP Records Modest Top-Line Growth Despite COVID-19 Lockdown

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Chemical and Allied Products Plc (CAP), a paints and decorative company recorded modest top-line growth in 2020 despite the COVID-19 lockdown in the second quarter (Q2) of 2020 and protests in the fourth quarter (Q4), effectively losing 7 weeks of sales.

For the Full Year 2020 period, revenue increased 3.9 percent from N8.4 billion in 2019 to N8.7 billion in FY 2020, driven by strong volume growth despite the disruptions in April, May and October.

Gross profit declined 5.5 percent to N3.8 billion, with gross margin of 43 percent largely due to due to input cost pressures on account of currency devaluation and supply chain disruptions.

Earnings Before Interest and Taxes (EBIT) of N1.6 billion, reflected a decline of 22.4 percent, with EBIT margin reducing 638 basis points from, 25.2 percent to 18.9 percent.

Key drivers of the reduction in EBIT are the decline in gross profit and investments in talent to strengthen the work force and drive profitable growth.

Total profit for the year was N1.3 billion, a 26 percent decline from N1.7 billion reported in 2019.

Earnings per share for the period of 182 kobo, down 26.1 percent from 249 kobo in 2019.

Free Cash Flow (FCF) came in at N1 billion in 2020, compared to N1.5 billion in 2019.

Free cash flow was impacted by lower operating cash flows which was offset by a reduction in net capital expenditure (-58.4% decline to N113 million in FY 2020).

The company continues to maintain a strong cash position (N5.8 billion) which it said will be deployed towards growth initiatives.

Commenting on the performance, Managing Director, David Wright, said:

“We are encouraged by the growth in revenue which has been solely driven by underlying volume growth in line with our strategy. Alongside the rest of the world, we experienced supply chain disruptions which impacted our raw material sourcing and resulted in input costs pressures. We have embarked on initiatives focused on mitigating these disruptions and expect to see positive results in 2021.”

The proposed merger between CAP and Portland Paints and Products Nigeria Plc announced in the fourth quarter of 2020 is expected to be concluded in the first quarter of 2021, according to Wright.

“We have received preliminary regulatory approvals and an order from the Federal High Court to hold a Court-Ordered Meeting. Merger completion is subject to shareholder approval and final regulatory approvals,” Wright said.

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