Investors react to Wapco’s first quarter results.
May 6th, 2008 Tunde Brown || tunde.brown@stockmarketnigeria.com
By Tunde Brown
In the midst of a persistent slide in the All Share Index as occasioned by the bearish trend analysts have described as normal for the right-sizing of equities’ prices, the share price of Lafarge Wapco plc has been no exception in the free fall. This has been due largely to the company’s first quarter performance that has dashed investors’ hope on the earning potentials of the stock, against the backdrop of recent promising projections in the sub sector.
Sometime in March this year, analysts had predicted the construction sub sector as a goldmine to look out for. They saw a pronouncement by the government on the importance of the real sector as a driver of the economy, as a precursor to huge budget expenditure for infrastructural development in the 2008 appropriation, which could ultimately impact the building materials sub sector positively, being a composite sector to the construction sub sector.
However, despite Wapco’s 16 percent increase in turnover for the first quarter ended 31 march 2008 form N9.53bn declared in corresponding period last year to N11.03bn this year, the profit before tax dipped by over 26 per cent, falling from N3.11bn in 2007 to N2.29bn in first quarter of 2008. In the same vein, profit after tax depreciated by 27 per cent to stand at N1.94bn down from M2.64bn in the first quarter of 2007.
The management of the company has attributed the decline in the bottom-line to an increase in cost of sales, stating that the company has in recent past, had to import clinker to limit the impact of the rising cost on profitability. Other reasons advanced by the company’s management relate to a drop in the metric tones of cement produced as a result of what was described as, ‘…several outages in the supply of natural gas and its production facilities’.
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