Vitafoam Nigeria Plc has secured a four-year N2billion soft loan from the Bank of Industry (BoI) at concessionary interest rate as part of the company’s strategic move to boost its working capital and sustain competitive edge.
The loan, which has an annual interest of 12 per cent compared with the over 25 per cent commercial bank rate as at last year, is expected to reduce Vitafoam’s finance cost and enhance the company’s ability to directly import its raw materials off-shore.
The Group Managing Director, Mr. Taiwo Adeniyi stated this at a media briefing in Lagos on Friday.
However, Adeniyi said: “The good news is that Vitafoam has secured N2.0billion structured working capital support facility with BoI at 12per cent per annum interest rate. When compared to commercial banks 24.5 percent average interest rate borne in 2017. There will be a huge favourable reduction in finance cost by a minimum of N240million, representing 20.4 percent. Secondly, the previously depleted working capital will be boosted by the Bol four-year working capital support.
“This will enable Vitafoam to source its major raw materials directly from overseas manufacturers, thereby retaining middlemen margin in the business. A minimum of 15 percent margin will be saved on every direct import of major raw materials.”
He explained that despite the 15.98 per cent inflation, in the economy, through firm cost control measures, management reduced administrative expenses by three percent (Group) and four percent (Company), while distribution cost reduced from five percent to four percent as percentage of revenue between 2017 and 2016 financial year.
He noted that due to weak working capital and paucity of forex for letters of credit, the company’s over 80 per cent of raw materials were locally purchased, thereby incurring more costs.
According to him, despite the challenges, the directors recommended N156.36 million dividend to be paid to shareholders from distributable profit.
Speaking on the outlook for the company this year, Adeniyi mentioned some initiatives that would boost profitability: “We have also created new business lines. Specifically, Vitaparts Nigeria Limited, a new subsidiary, established to manufacture oil filters, is expected to commence operation in the third quarter of the current financial year while importation and installation of the manufacturing plant will be concluded in the second quarter of the year, all things being equal.
“These new strategic initiatives are designed to diversify operation and revenue base of the group. In a similar vein, Vitablom Nigeria Limited, the soft furnishing subsidiary has concluded installation of fiber processing plant. The new production line is expected to boost the operation and revenue base of the group,” he said.
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