Vitafoam: Burden Of Unviable Operations | Independent Newspapers Limited
Newsletter subscribe


Vitafoam: Burden Of Unviable Operations

Posted: May 8, 2015 at 12:04 am   /   by   /   comments (0)

By Andy Nssien


Vitafoam Group  is forging ahead as it left in the  kitty, N2.8 billion reserves which gave a boost to the shareholders’ fund  of N3.03 billion last year, the highest in its operation for the past five years. The 12 per cent growth of the shareholders’ fund from N2.7 billion registered in the corresponding period of 2013 formed part of the highlights contained in the Vitafoam Nigeria Plc consolidated and separate financial statements for the period ended September 30, 2014 which was released recently.

However, the announcement of the results was a relief to shareholders and other stakeholders who had grown grey hair over the delay in filing the report with The Nigerian Stock Exchange (NSE) where it is quoted.

The company had informed the NSE earlier in the year that there would be a delay in the release of the company’s audited financial statements for the year ended September 30, 2014 and the unaudited accounts for the first quarter ended 31 December 2014.

Vitafoam explained that the delay was as a result of challenges associated with its ongoing migration from Sage Line 500 accounting software to the newly acquired Sage ERP X3 Package. The company stated that the implementation of the new software had impacted the timelines previously set for the preparation and audit of the year end accounts.

In the full year results for the period ended September 30, 2014 recently released, Vitafoam Nigeria Plc proposed a dividend of N246 million, which translates into 30 kobo per share, in addition to a bonus share in the ratio  of one new share for every five ordinary shares already held.  The proposed award to the shareholders is a manifestation of the company’s improved  financial performance, with an after tax profit of N659 million in 2014 as against N395 million recorded in the previous year, an increase of 67 per cent. This paved the way for the earnings per share to grow by 69 per cent to 81k when compared to 48k registered in 2013.

The company’s shareholders are expected to endorse the proposal at the annual general meeting slated for  June 4, 2015.

As the Vitafoam Nigeria plans to consolidate on its present performance, some  operations of the group should be of concern to the company. It should worry the company that revenues emanating from  its subsidiaries outside the country has dropped by 66 per cent to N55.5 million from N164.2 million recorded  in 2013. Finance cost, comprising interest on loans and overdraft has shot up by  19 per cent to N804.8 million. High borrowing cost and accretion of interest rose  by 30 per cent to N4.8 million from N1.2 million in 2013. The expenses represent finance cost incurred on N450 million loan to finance construction of warehouse facility in 2011.

Much more worrying is the fact that Vono Products Nigeria and Vitapur Nigeria Limited which Vitafoam Nigeria controls 47 per cent and 40 per cent interests respectively, have been running at a loss for the past two years now. For Vono Products, the loss dipped from N4.8 million to N5.2 million, while Vitapur Nigeria plight worsened  from  N104.6 million loss  in 2013 to N195.3  million last year.

The group continued to reel under the yoke of  borrowing which aggregate rose from N3.6 billion to N3.9 billion in 2014. These liabilities arose from finance lease, governments grants, banks borrowings, overdrafts and commercial papers. Also affected is the interest payment which the group secured from an International Finance Corporation (IFC) loan to finance capital construction at its Sierra-Leone subsidiary in 2013.

Bloating expenses arising from key management compensation should not be allowed to get out of hand.  For instance, salaries and other short term employee benefits rose by 32 per cent  to N130 million, while the post employment benefits shot up by 270 per cent to N58.5 million in 2014.

There is the need for the company to sensitise the shareholders whose  value of dividend warrants continued to rise from N162.8 million in  2013 to N230 million as of last year. One of the effective ways to do this is for the company to publish the names of the affected shareholders in the newspapers, while encouraging them to open current accounts  with the banks where future dividend warrants could be claimed.

However, the good news is that the company is already manifesting signs of better years ahead. Only few days ago, Vitafoam Nigeria set a new 52-week price high at the trading session  when its share price rose to N6.30 per share at the stock market.

With its root name derived from “Vita”- the Latin word for “life”, the company has since its inception, till date, worked at contributing to every aspect to its synonym from the cradle to old age. It has produced quality domestic and industrial products that add absolute value and comfort to life for work, school, leisure, health, maternity and child growth. Established in 1962 by two giants; British Vita and Unilever, and listed on the floor of the Nigerian Stock Exchange in 1978, Vitafoam has become Nigeria’s most prominent and leading producer of polyether, foam products, furniture, upholstery products and adhesives.