Seven-Up Bottling Plc’s year end results shows the company’s aggressive market penetration across various product lines as profit nudged up to 10.64 percent despite a hard biting economic environment that has seen stunted growth in consumer product firms in the country.
The company declared a profit of N7.12 billion for the year ended March 2015, compared with N6.43 billion, a year ago. Sales were up by 5.93 percent to N82.45 billion.
The growth in sales was attributed to the company’s aggressive penetration in the rural areas than urban Nigeria. This gave the company higher market leverage than newer fringe players competing with the products in the cities.
The company has a well-coordinated distribution network with over 200 distribution centers located across the country. Market watchers say the company’s brand also helped bolster sales growth and the retention of market share.
Seven-up markets and distributes 7UP, Pepsi, Mountain Dew, Teem, Mirinda and Aquafina brands. The branded products has improved the return on advertising and marketing budget as selling and distribution costs fell by 2.33 percent to N12.90 billion.
While 7up has fared well, consumer good firms in the country are struggling under weak consumer spending spurred by naira devaluation, rising inflation and security challenges.
Naira devaluation exposed consumer good firms to currency volatility as imported raw materials became expensive, thereby spiraling cost of production.
A 40 percent decline in the price of oil forced the Central Bank of Nigeria to devalue the naira in order to stabilize the economy and protect the country’s foreign reserves from continued depletion.
Reserves fell 23 percent to $29 billion in the year to the end of June but have risen to $31 billion in July, according to latest figures from the CBN.
Consumer spending has been hampered by rising inflation which was nine percent in May from 8.7 percent a year earlier, data from the National Bureau of Statistics show.
The company spent N0.6303 on input cost for each unit of the product while cost of sales was up by 5.18 percent to N51.97 billion in 2015, compared with N49.42 billion the previous year.
7up’s gross profit was up 7.06 percent to N30.40 billion in the period under review from N28.70 billion in 2014. In addition, net margin, which is a measure of profitability and efficiency moved to 13.54 percent in the period under review as against 11.71 percent last year.
This means that the company is efficient in managing direct costs, attributable to projects. The company’s total assets grew by 21.16 percent to N67.67 billion in 2015 from N55.86 billion in 2014.
Shareholder’s equity also rose by 38.1 percent to N23.93 billion. 7up’s share price has been rising since 2011 to close at N188.00 on the floor of the NSE. Market capitalization stands at N121.07 billion.