Earnings Analysis 9 Months: CCNN Q3 Results Raises Cause For Concern

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CCNN released its 2013 9 months results showing 6% over the same period last year to N12billion. The Cement Manufacturer also saw a rise in Gross profit of 16.6% to N4billion. Pre-tax profits at the end of the period was N1.65billion , 30% higher than the same period last year.

Quarter on Quarter Result

Key Highlights[upme_private]

• The company seem set to beat last years result by at least 15% as it appears the crisis in the North (its operational HQ) hasn’t much affected its ability to generate profits
• The result shows the company has benefitted from its ability to reduce cost as profitability has increased in double figures despite revenue only rising 5%. It is not easy maintaining a strict cost profile amidst the harsh economic environment we are in
• The company did borrow more this year increasing its debt to N862million from N136million. Despite that, the debt to equity is still very low at 10%.
• On a Quarter on Quarter basis the results reveals a much difficult Q3 for the company. Revenue dropped to N3.2billion from its Q1 high of N5billion. Gross Profit also drops to N1billion the lowest quarter this year.
• In fact, Q3 performed worse in terms of margins as dwindling sales begin to take effect. Operating profit margin did fair better in Q3 but that was due to a very low operating expense of N561million which I believe need a lot of explanations
• Profit before tax for Q3 was N459million down 46% from N670million posted in Q2.
• The result in general has lowered my bullish expectation for the stock in view of its future outlook. CNN is trading at N9.5 and at a P.E ratio of 9.9x

CCNN released its 2013 9 Months result in the website of the NSE[/upme_private]