Earnings Analysis: Chellarams Plc Post 584% Increase In Pre-Tax Profits

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Chellarms Plc released its 2013 first quarter results showing revenue grew 1% to N5.3billion when compared to the same period 2012. Operating profit dropped 31% to N66million compared t N95million a year earlier. Pre-tax profits however, rose 584% to N376million (2012 Q1: N55million).

[upme_private]Key Highlights

• Profits rise was mainly due to income from non core operating income (other income). The results released did not provide details. 
• Other income is usually not a good metrics for measuring a company’s performance because it is unstable. However, this is welcomed
• Finance cost dropped in half this quarter compared to last.
• Debt to equity is still very high and actually increased to 1.33. 
• The company generated negative operating cash flows of N1.1 billion and they had to rely on income from investments in associates (N300m) and more debt to remain financially viable.
• Selling and General Expenses as a percentage of Gross Profit is 90% and not what any serious company should be averaging. 
• This is Not a company on my radar.
• Bottom Line, I do not consider buying the stock

Chellarams released its 2013 Q1 results in the website of the NSE[/upme_private]