- Chemical and Allied Product's revenue grew in 2020, but the company recorded a 26.6% drop in operating profit
- The decline in CAP's earnings had occurred last year during the COVID-19 pandemic and lockdown, but still, its expenses rose
- CAP's earnings dropped amid an ongoing acquisition talk with Portland Paints, which is expected to be completed in Q2 2020
Chemical and Allied Product's (CAP) seem to have had and is still having a hard time with the COVID-19 pandemic. Nigeria had recorded its first COVID-19 case on February 27, 2020, but didn't lockdown until March 30 Last year.
The lockdown had lasted until May 4, 2020, when the easing of the lockdown began. Between the lockdown and the reopening of the economy, so many businesses were impacted. One of them is CAP.
As a paint manufacturer, the company's service wasn't considered essential to operate amid the lockdown. This slowed revenue and negatively dragged profit down. In an analysis of the company's 2020 earnings, CAP operating profit and after tax shrunk.
Between January to December 2020, CAP recorded N565.09 million drop in its operating profit, reflecting the struggle of the company with COVID-19. In its 2020 financials, the paint maker said it is still being affected:
"Also the Coronavirus disease (Covid-19) outbreak caused significant disruption to the Nigerian economy and is still impacting the Company, its employees and customers."
CAP's disappointing earnings amid COVID-19/takeover
Amid an acquisition talk with Portland Paints, CAP's earnings are slumping significantly, signifying a disappointing financial performance for last year.
According to analysis of the company's financials, revenue rose by 3.8% to end last year at N8.73 billion, against the N8.41 billion generated during the same period ended December 31, 2019.
Aside from the revenue climbing, its gross profit for the period under review fell to N3.74 billion, ending 2020 below the N3.97 billion recorded during the corresponding period of 2019.
The company's woes were compounded by the rising cost of sales which rose to N4.99 billion in 2020, surpassing the N4.43 billion spent on production during the preceding 2019. This is despite the lockdown that occurred in the second and third quarters, which stopped non-essential companies like CAP from operating fully.
CAP recorded N565,09 million wiped off its operating profit, which declined by 26.6% when both periods were compared. In 2019, operating profit had hit N2.12 billion, but failed to surpass this amount in 2020.
In the same vein, profit before tax dipped, ending last year with N1.80 billion, below the N2.54 billion CAP reported in the full year 2019. The same went for profit after tax, which dropped to N1.22 billion in 2020, against the N1.74 billion that was reported a year before.
Loss amid takeover of Portland Paints
The company is planning to acquire its competitor, Portland Paints, both of which have a substantial shareholder in UAC Nigeria. CAP plans to make an outright purchase, erasing the brand name of Portland Paints.
Legit.ng gathered that the acquisition deal will be wrapped up in the second quarter, of this year, which is between April and June. It has already received board approval on February 18, 2021.
Aside from the burden of COVID-19 still hanging around the company's financials, this deal will lead to CAP taking over the debt and other liabilities of Portland Paints while it pays Portland's shareholders off by cash or shares in its entity.
Meanwhile, Legit.ng had earlier reported that the founder of Stanbic IBTC, Atedo Peterside, has advised the government to invest the $1.5 billion set aside for refinery repair on the construction of hospitals in Nigeria.
Peterside said the money budgeted for the rehabilitation of the oil refiner could build twelve world standard hospitals across Nigeria's geopolitical zone.