VITAFOAM Nigeria Plc closed what is their third quarter in June 2020 by declaring a net profit of N2.1billion, a net cash flow position of N3.9billion and a balance sheet of N18.4billion.
Being the only publicly quoted mattress and foam producing company on the Nigerian Stock Exchange, a peer to peer analysis to ascertain the true extent of its performance in comparison with its competitors is a herculean task.
This notwithstanding, VITAFOAM which has existed through five decades since 1962 has the reputation of being a leader in its industry, given its longevity and popularity amongst the Nigerian Populace. It however has a very strong competitor in MOUKA.
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VITAFOAM was established on Aug 4, 1962, by British Vita and Unilever and listed in the floor of the Nigerian stock exchange in 1978. It is based in Ikeja Lagos and is currently Nigeria’s foremost manufacturer of premium polyurethane foam products, specializing in the sale of mattresses, pillows and bedding, furniture and upholstery products.
Its books are prepared on an accounting period that runs through September till August making April till June its third Quarter.
Financial position and performance ratios
VITAFOAM has a healthy balance sheet of N18.4billion. Its total liabilities stand at N10.8billion producing a Debt to Asset Ratio of 36.84% meaning it is not highly-geared and has the capacity to incur more debts in furtherance of its capital expansion drive. It has a Price/Earnings ratio of 2.44.
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Current ratio is perfectly pegged at 2:1 which meets the benchmark specification while Acid-test ratio; a more pertinent measure of the ability of a business to meet its short term obligations as they fall due stood at 1:1, again meeting the benchmark.
Property Plant and Equipment (PPE) increased from the N2.7billion it closed 2019 with, to N5billion in the 9 months leading to June 2020.
Profit or loss statement analysis
In the 9 month period, VITAFOAM generated a revenue of N16.5billion, 5.7% less than the N17.5billion achieved in the corresponding period of 2019.
Whist the top-line may have decreased y/y, bottom line surged. Profit after Tax for the 9 month period doubled the preceding years’ numbers. N2.1billion was generated in 2020 while N1.1 billion was generated in 2019.
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Cost of sales this time racked up 56.7% of revenue, moving from the 66% percent in 2019 y/y. Rising costs have hitherto being a discussion point for VITAFOAM, making the improvements shown in this period under review truly commendable.
Other cost components such as Administrative expenses and Distribution expenses remained at par and accounted for immaterial differences when compared to the corresponding period but combined, constitute a fair 22.8% of revenue.
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Quarter 3 review
Operating activities ended with a negative net cash flow of N977million highlighting their inability to generate sufficient cash and cash equivalents from its core operation in the quarter. Investing activities had a negative net cash flow position of N73million with financing activities generating the only positive at N1.2billion.
Revenue in the quarter reached N5billion but net income pegged at N440million with a profit margin of 8.75%
VITAFOAM has threaded a topsy-turvy path in this decade making 3 straight losses from 2015 until 2017. N71.9million in 2015, N32million in 2016 and N127million in 2017. It upended the sad trajectory with a profit of N601million in 2018, fully and immensely banishing ghosts from its horrid past in 2019 with a commanding profit of N2.4billion.
With 9 months into 2020 accounting year, VITAFOAM already boosts a profit of N2.1billion. You don’t need clairvoyance nor be an astute betting-man to expect a closing bottom-line in the next quarter that could make light work of 2019.