27 October 2008

Ghana: Cfao Almost Quadruples Profit

CFAO Ghana Limited has reported inspiring financial results for the third quarter of the year. The company chalked 398% growth in net profit over the same period last year.

The company recorded a sales revenue of GH ¢35.66 million during the third quarter of the year as compared to GH¢ 23.97 million during the same period in 2007. This signifies 49% growth over the same period in the previous year. On the other hand, because of the adoption of more prudent measures resulting in improved efficiency -General, Administrative and Selling Expenses fell by 15% from GH ¢2.64 million to GH ¢ 2.29 million.

These collectively resulted in a net profit of GH¢ 1.95 million during the third quarter of 2008, as compared to GH¢ 392,000 during the same period in 2007. This shows a magnificent increase of 398% in the company's net earnings.

CFAO Ghana Limited's core business is the distribution and servicing of automobiles and other selected machinery including the installation of Otis elevators. The company's leading brands are Renault, Mitsubishi and Bridgestone tyres. CFAO Ghana Limited also undertakes car rentals and other related activities.

So far, this year, the share price of the company's listed stock appreciated by 14% from GH¢ 0.035 to GH¢ 0.04. This is, however, less impressive taking into consideration the good financial performance of the company during the first two quarters, coupled with the impressive average performance of the GSE so far this year. The less inspiring performance of the company's stock is largely due to the shareholding structure of the company. The parent company of CFAO Ghana Limited, CFAO S.A. France holds about 82% of the issued shares which are hardly traded. This implies that only 18% (40,320,000 shares) of the shares which are held by other retail and institutional investors will probably be available for regular trading. This therefore affects the liquidity of the shares thus reducing the possibility of a new price discovery.

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