Cutix Q1 Profit plunged 81% amid rising input and finance costs.

NaijaOnPoint Nigeria reports that Cutix Plc, a leading Nigerian cable manufacturer, has reported a sharp 81% year-on-year decline in pre-tax profit for the first quarter of its 2026 financial year ended July 31, 2025.

The company posted a pre-tax profit of ₦84 million, down from ₦442 million in the same period last year, as rising raw material and finance costs weighed heavily on earnings.

Revenue from cable sales, the company’s primary income source, fell 7.40% to ₦3.282 billion, while the cost of raw materials rose about 7% YoY, pushing cost of sales to ₦2.898 billion. This led to a 21% gross margin compression, dropping margins to 18%.

Despite declines in administrative and distribution expenses, savings were insufficient to offset weaker revenue and cost pressures. Operating profit fell 35% YoY to ₦276 million, representing just 18% of the company’s FY 2025 full-year profit, with the operating margin slipping to 8%.

Finance costs surged 160% to ₦191 million, up from ₦73 million last year, already accounting for 43% of the prior year’s full finance costs. This was driven by higher interest on term loans, commercial papers, and overdrafts, reducing the interest coverage ratio to 1.44x from 5.79x. Consequently, net profit slumped 81% to ₦57 million, only 6% of the previous year’s total profit.

Balance Sheet Pressures

Total assets rose 33.56% YoY to ₦10.677 billion, driven by current assets which account for 57% of the balance sheet. Inventories and trade receivables made up over 56% of total assets.

However, retained earnings fell sharply by 72% to ₦711 million, while borrowings surged 175% to ₦5.004 billion, representing 47% of total assets. This indicates a more debt-heavy capital structure, increasing financial risk in a high-interest environment.

Key Q1 2026 Highlights:

Revenue: ₦3.282bn (−7.40% YoY)
Cost of Sales: ₦2.898bn (+7% YoY)
Gross Profit: ₦626m (−22.15% YoY)
Operating Profit: ₦276m (−34.71% YoY)
Finance Costs: ₦191m (+160.3% YoY)
Pre-tax Profit: ₦84m (−81.04% YoY)
Total Assets: ₦10.677bn (+33.56% YoY)

At market close on August 29, 2025, shares of Cutix traded at ₦3.50, reflecting a 52.2% year-to-date gain.

Investor Insight

While the stock has rallied strongly in 2025 on optimism about the company’s market positioning, fundamentals remain under pressure. Weak profitability, rising debt levels, and high receivables raise concerns over liquidity, dividend sustainability, and long-term earnings growth.

Notably, the company has declared a final dividend of 10 kobo per share for FY 2025, payable on September 2, 2025.