Chemical and Allied Products (CAP)Plc, one of Nigeria's leading paints and coatings companies, has taken steps to secure alternative raw material sources to mitigate against further disruption in raw materials supply.
The Managing Director of CAP Mr. David Wright, stated this while commenting on the company's unaudited results for the first quarter ended March 31, 2020.
CAP posted a decline of 9.5 per cent in revenue to N2.093 billion, from N2.313 billion. Although the company strived to reduce operating expenses by 22.4 per cent from N597 million to N488 million, it ended the quarter with a lower profit after tax of N203 million, compared with N457 million in 2020.
Speaking, Wright attributed the decline majorly to global disruptions caused by the COVID-19 pandemic.
Hence, the decision to secure alternative supply sources.
Wright said: "In the first quarter of 2021, we saw the biggest impact of the COVID-19 pandemic on our business. Increased global demand for chemicals driven by the economic rebound in Asia and feedstock challenges, with several suppliers declaring Force Majeure, resulted in a global shortage of raw materials. This significantly impacted product availability in the first quarter of the year.
"In addition, there was a scarcity premium placed on all available raw materials which eroded gross margin across various product lines."
According to him, "we have taken steps to secure alternative raw material sources and are increasing inventory levels to mitigate against further disruptions. As such, we expect a strong recovery in the remaining quarters of the year."
The MD said the company's focus remains on creating shareholder value while they would continue to pursue attractive growth opportunities to achieve this.
Already CAP is merging with Portland Paints and Products Nigeria Plc and Wright expressed optimism that the merger would present a unique opportunity that would benefit all stakeholders, from shareholders to customers as well as the broader economy.
"I am excited by the prospect of an enlarged company with a broader decorative paint portfolio covering the premium, mid-market and affordable segments and the inclusion of marine and protective coatings, all of which will benefit our customers and shareholders," he said.
According to him, CAP would become the largest player in the Nigerian paints market by market share which is estimated at 14.9 per cent and this is due to the fact that the Portland Paints' Sandtex brand provides access to the large, untapped, high volume "mid-market and value for money" segment of the decorative paint market.