Vitafoam Sustains Revenue Growth, Dividend Payout

Kayode Tokede

Vitafoam Nigeria Plc in three years has sustained growth in revenue, cost-effectiveness, and total assets that have translated into profit growth and robust dividend payout to shareholders.

The leading manufacturer of quality foams and furniture accessories between 2022 and 2020 posted a profit before tax,  gaining 28 per cent to N7.21billion in 2022 from N5.65 billion reported in 2020, while profit after tax stood at N4.52 billion in 2022 from N4.11billion reported in 2020.

The increase in profit before tax and profit after tax in the period under review was driven by the management’s intensified expansion in business lines, internal efficiency and introduction of new products acceptable to consumers.

In the period under review, dividend payout to shareholders increased by 117per cent to N1.52 per share in 2022 from N0.70 per share paid to shareholders in 2021.

Between 2022 and 2020, the management paid shareholders N4.65billion as dividend, about 35.2per cent of the N13.23 billion profit after tax generated in the period, amid growing profit and expansion.

In the three years, Vitafoam Nigeria grew revenue to N46.3billion from N23.4billion reported in 2020, an increase of 98per cent.

Vitafoam Nigeria over the years has improved its revenue in polyurethane/reconstituted foam (mattress, cushions, pillows, sheetings) and allied products that conforms with international standards, and applicable statutory.

The company attributed its steadily impressive performance to continuous investment in innovative products and services across its businesses.

Despite the inclement operating environment, Vitafoam has remained resilient with gross margin increasing to 33.2per cent in 2022 financial year as against 29.9per cent in 2018.

The company’s stock is one of the most sought-after on the Nigerian Exchange Limited (NGX) due to track record of consistent profitability as its stock price Year-Till-Date gained 2.2 per cent to close at N20.90 as at June 09, 2023 from N20.45 it opened for trading in 2023.

The stock in 2021 was trading at N7.80 per share and it has reached 52-week high of about N23.6 per share this year.

The lasted audited result and accounts of Vitafoam Nigeria for the period ended September 30, 2022 reflected the management’s determination to overcome challenges with impressive performance.

The growth in revenue reflected an expansion in total assets in the period and eventually dividend payout to shareholders.

Vitafoam Nigeria recorded a significant increase in revenue amid consumers’ weak purchasing power.

The frontline foam-manufacturing company’s  2022 performance further highlighted the severe business operating environment,  faced by companies  in the country.

Despite the inclement operating environment, the Group’s topline position showed a 31 per cent increase in revenue to N46.31billion in 2022 from  N35.4billion in 2021, driven by 30.77 per cent increase in sale of goods (Foams and other products) and 31.62 per cent growth in  rendering of services by delivering of goods at a point in time  (Freight Income).

The management proposed dividend rose by seven per cent to N2.37billion in 2022 from N2.22billion dividend in 2021.

The company had attributed its steadily impressive performance to continuous investment in innovative products and services across its businesses.

Revenue “other than from contracts” with customers showed N45.48 billion within Nigeria in 2022 from N34.55billion in 2021, while outside Nigeria, it stood at N829.16million in 2022 from N853.9million reported in 2021.

From the profit and loss figures, Vitafoam Nigeria cost of sales rose by 42.3 per cent to N30.91billion in 2022 from N21.72billion in 2021.

The group reported N30.09billion raw materials and consumables cost of sales in 2022 from N21.17billion in 2021, key contributing factor to the overall cost in the year under review.

The interplay between revenue and cost of sales dragged gross profit in 2022 to N15.4billion, an increase of 13 per cent from N12.6billion reported in 2021.  Vitafoam Nigeria’s non-core business transactions closed audited 2022 at N397.92million in 2022 from N236.55million in 2021.

As regards operating expenses, the group reported 49 per cent increase in total operating expenses to N8.87billion in 2022 from N5.97billion in 2021.

The breakdown of expenses revealed that distribution expenses rose by 47 per cent to N2.08billion in 2022 from N1.41billion in 2021 as Administrative expenses hits N6.79billion in 2022, representing an increase of 50per cent from N4.54billion reported in 2021.

On finances, Vitafoam Nigeria finance income moved from N254.86million in 2021 to N998.62million in 2022, while finance charges dropped by 17.3per cent to N704.99 million in 2022 from N852.51million recorded in 2021. In addition, the group’s Basic Earnings Per Share stood at N338per share in 2022 from N339.00 per share in 2021.

With the exception of a tint of increased gearing, the foam-manufacturing group recorded a well-rounded performance with considerable improvements in revenue, profitability, returns and balance sheet strength.

Group total balance sheet size grew by 24 per cent from N31.79billion in 2021 to N39.44billion in 2022. Total assets growth was driven by significant increases in current assets.

Current assets increased to N32.85billion in 2022, representing an increase of 31.46per cent from N24.99billion in 2021, while non-current assets dropped by 3.1 per cent to N6.59billion in 2022 from N6.8billion in 2021.

Viatfoam’s total liabilities also rose by 26.1 per cent from N18.85 billion in 2021 to N23.77 billion in 2022. The breakdown of total liabilities showed a 25.3per cent drop in non-current liabilities to N1.797billion in 2022 from N2.41billion in 2021, as current liabilities rose by 33.6per cent to N21.97billion in 2022 from N16.45billion in 2021.

While the paid-up share capital remained unchanged, total equity funds rose by 21.13 per cent from N12.94 billion to N15.67 billion reported in 2022.

With 25.4 per cent increase in bank loans to N13.98billion in 2022 from N11.14billion in 2021, the group’s financing structure showed slight increase in leverage, though the internal financing structure remained considerably high.

The proportion of equity funds to total assets dropped to 39.7 per cent in 2022 from 40.69 per cent in 2021.

The liquidity position of the company improved considerably during the period with better financial coverage and working capital. Current ratio, which relates easily available finances to similar liabilities, dropped from 1.52 times in 2021 to 1.49 times in 2022.

The latest audited report showed resilience and underscored the focused investments and expansions in value-adding businesses. In the increasingly competitive and constraining business landscape, companies with diversified products and long-established cost management structure stand a greater chance of winning the headwinds.

There is considerable untapped potential in the group’s emerging protective and insulation businesses while the foam, bedding and furniture businesses are in strong market-leading positions. The Group’s other subsidiaries have demonstrated strong potentials to become leaders in their respective industries.

An expected boost in intra-Africa trade should further open up opportunities to scale up market share.