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Mkt operators fret as Vitafoam’s overhead hits N1.33bn

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As operating profit increased from N888 million to N1.33 billion, some capital market operators yesterday expressed mixed reactions to Vitafoam Nigeria Plc’s declaration of dividends despite posting loss for the financial year ended September 30, 2017.
Also, loss after tax surged to N127.69 million from N32.03 million achieved in 2016, representing a loss per share of 15 kobo as against four kobo in 2016.
They said in Lagos that the company needed to map out strategies that would return it to profitability to avoid payment dividend out of retained earnings for two consecutive years.
Chief Operating Officer, InvestData Limited, Mr Ambrose Omordion, said that paying dividend from retained earnings for two years was not healthy for the company.
Omordion said that the development would affect the company’s expansion or capacity building plan.
He noted that the development was a pointer that management of the company was struggling.
Omordion said that the company’s unimpressive numbers would affect its share price on the Nigerian Stock Exchange (NSE) despite declaration of 15 kobo dividend against 12 kobo paid in 2016 financial year.
Also, the immediate past Secretary, Independent Shareholders Association of Nigeria, Mr. Bayo Adeleke, said that it was an acceptable practice to pay dividend out of retained earnings.
However, he said that the board and management needed to work harder to produce profit from operations going forward. Vitafoam’s directors had submitted its audited financial reports for the year ended September 30, 2017, offering to pay a dividend of 15 kobo per share, despite the loss after tax resulting from the twin effects of the increased finance costs and tax expense for the period under review.
The directors are proposing a total dividend of N156.36 million at the Annual General Meeting (AGM) to hold on March 8, 2018.
A breakdown of the result showed that turnover during the period under review rose to N17.69 billion, up by N4.13 billion or 30.4 per cent compared to N10. 57 billion posted in the preceding period of 2016.
Its cost of sales rose by N3.69 billion or 41.51 per cent to N12.61 billion from N8.91 billion, while gross profit stood at N5.09 billion, up from N4.66 billion in 2016.
A report by the News Agency of Nigeria (NAN) also said that other gains of the company stood at N283.57 million from N284.86 million in the previous period; while administrative expenses dropped slightly from N3.43 billion to N3.31 billion.
The company’s distribution costs also rose to N726.18 million from N632.05 million, while operating profit increased to N1.33 billion from N888 million.
Its finance income declined to N61. 15 million from N68.26 million; finance costs jumped to N1.38 billion, up by N481.76 million or 53.82 per cent from N895.06 million in 2016.
The company’s profit before tax dropped to N18.13 million from N61.19 million in the corresponding year.

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