FOSRICH reports 3% increase in nine months net profit

November 11, 2020
Fosrich Company Limited (FOSRICH),  for the nine months ended September 30, 2020, reported a turnover growth of 17% year on year, to close the period at $1.39 billion compared to the $1.19 billion for the same period last year. For the third quarter, the company posted an increase of 21% in revenues to close at $534.33 million relative to $440 million for the same quarter of 2019. The Company noted, “these increases were attributed primarily to the greater availability of the products required by the market. The product lines that had significant increases were Industrial Electrical Products, which grew by 214% and PVC Products, which grew by 240%.”

Cost of goods sold showed a 25% increase, closing the period at $837.16 million relative to $671.60 million for the same period last year. For the quarter, the company had a 33% increase in cost of goods sold to close at $318.62 million compared to $240.38 million for same quarter of 2019.

As such, gross profits for the period advanced by 8% and closed out the nine month period at $554.33 million relative to $514.83 million in the prior year’s corresponding period.

Administrative and other expenses were $436.08 million, an 11% increase on the $394.10 million posted last year. According to the Company, “this was driven primarily, in Q1, by a combination of building out of our Human resources expertise as we build capacity for the future. We now have a new Sales Manager. Other cost increases were incurred due to staff benefits; increased legal and professional fees; increased selling and marketing costs; increased computer expenses; increased motor vehicle expenses; increased insurance costs; increased security cost and increased electricity cost. This increase is also being affected by the requirements of IFRS 16, which requires that all long-term leases be brought on the balance sheet as right-of-use assets with the financial obligation being reflected as financing and with the appropriate financing cost calculated. We have opted to include this cost, which amounted to $9.9 million as part of operating cash flows. During Q2, in response to the challenges anticipated as a result of Covid-19, we effected certain cost containment measures, which we expect will be the new normal for the company.”

In addition, other income year to date increased to $32.83 million at the end of the nine months ended September 30, 2020 compared to $21.62 million booked for the similar period in 2019. According to management, this “other income was positively impacted by foreign currency gains.”

Fosrich incurred finance costs of $75.83 million, 13% more than the $67.16 million reported for the same period in 2019. Fosrich noted that this was, “due to the increased financing being carried.”

Notably, Fosrich reported a marginal 0.07% increase in profit before taxation to $75.25 million relative to $75.20 million recorded in 2019. Profit before taxation for the quarter amounted to $53.06 million, up 321% from the prior year’s corresponding quarter of $12.60 million.

Fosrich recorded no taxation for the nine months but for the same period in 2019 a taxation of $1.86 million was booked. As such, net profit for the nine months ended September 2020 increased 3% to amount to $75.25 million versus $73.34 million documented a year earlier. Net profit for the quarter amounted to $52.98 million relative to $11.67 million reported for the third quarter of 2019.

As a result, earning per share for the period amounted to $0.15 compared to $0.15 in 2019.  EPS for the quarter amounted to $0.11 (2019: $0.02) while the twelve month trailing EPS $0.20. The number of shares used in our calculations amounted to 502,275,555 units. FOSICH last traded on November 10, 2020 at $3.65.

As it relates to COVID-19, Management mentioned, “We have re-evaluated all credit relationships and where necessary have reduced credit limits and term. Some items are now sold only for cash or on a seven (7) day credit basis.”

Regarding new activities, FOSRICH noted, “In October 2018 FosRich commenced discussion with JPS with a view to taking over their pole-mount transformer repair activity. This discussion, after 20 months, has resulted in an agreement. We have begun the process of sourcing the necessary equipment and the factory buildout has started. We should be up and running by the end of December 2020. Construction of our new distribution centre at 76 Molynes Road has started and should be completed by February 2021 and ready for occupation. We have setup a new company, Blue Emerald Limited. We are seeking to have this company registered under The Special Economic Zone Authority, in order to take advantage of the significant long-term tax concessions that are available. Activities being undertaken at the new Hayes facility in Clarendon, will be done through this new entity acting exclusively for FosRich under a contract manufacturing arrangement.”

Balance Sheet Highlights:

As at September 30, 2020 total assets amounted to $2.83 billion compared to $2.23 billion twelve months earlier. The growth year over year was due to increases in ‘right of use assets’ to $402.19 million (2019: nil) and ‘investment from associated company’ to $239.89 million (2019: nil). ‘Due from related parties’ also contributed to the increase with $282.61 million reported relative to the $96.59 million booked the prior year.

Shareholder’s Equity for the period totaled at $868.94 million (2019: $766.68 million) resulting in a book value per share of $1.73 (2019: $1.53).


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