CUTIX Plc, the Nigerian cable manufacturer, has forecast a profit after tax of N80.6 million for the third quarter of its 2027 financial year, as rising copper prices and higher fuel costs threaten to weigh on earnings.
The company projected revenue of N4.26 billion for the three months ending January 31, 2027, according to its third-quarter financial forecast.
Despite the expected revenue growth, Cutix anticipates a profit before tax of N122.11 million, down from the N162 million forecast for the second quarter (Q2), reflecting mounting production and operating costs.
The company attributed the pressure largely to the rising cost of copper, its major raw material, which it expects to continue increasing without a corresponding adjustment in selling prices because of intense competition in the market.
Cutix estimates that raw materials will account for 85 percent of projected revenue in the third quarter (Q3), leaving a relatively small portion of sales to cover distribution, administrative, finance and other expenses.
The company’s forecast puts cost of sales at N3.62 billion, while distribution, administrative and other expenses are projected at N426.34 million. Finance charges are expected to reach N127.82 million, while other income is estimated at N34.5 million.
After an estimated tax charge of N41.52 million, Cutix expects to retain N80.6 million in profit, equivalent to about 1.9 percent of projected revenue.
READ ALSO: Cutix shocks markets, announces CEO, CFO exit, names interim replacements
Copper prices threaten profit margins
The company said the raw material cost-to-sales ratio would remain elevated because of continued increases in copper prices and its inability to fully pass higher input costs to customers.
Copper is a major component in electrical cables, making its price a significant determinant of production costs for manufacturers such as Cutix.
The competitive market environment limits the company’s ability to raise selling prices in line with input costs, potentially leaving it with thinner margins even when revenue increases.
Cutix expects Q3 revenue to rise by 15 percent, based on its first quarter (Q1) performance and anticipated improvement in sales volumes.
However, the projected increase in sales may not translate into stronger earnings if material and distribution costs continue to rise.
The company also expects distribution expenses to increase from the preceding quarter, partly because of higher petrol prices.
READ ALSO: Aradel, Sterling, Haldane, Cutix, Meyer, FCMB, among 12 firms cautioned by NGX over rule breaches
Interest rates expected to ease
Cutix expects a gradual reduction in interest rates during the 2027 financial year following the Central Bank of Nigeria (CBN)’s reduction of its Monetary Policy Rate from 26.5 percent to 23 percent.
The company’s forecast assumes that monetary policy will continue to ease during the period.
A sustained decline in borrowing costs could help reduce finance expenses, although the benefit to Cutix will depend on its debt structure, the rates charged by lenders and the timing of any further monetary policy changes.
The company has projected finance charges of N127.82 million for the third quarter.
It also applied a 34 percent tax rate in preparing its forecast, citing the Senate’s approval of the new tax reform bill.
Cutix projects stronger cash position
The cable maker expects cash and cash equivalents to reach N3.77 billion at the end of Q3, compared with an opening negative balance of N1.22 billion in its forecast.
Its cash flow projections show net cash generated from operating activities of N4.14 billion, while investing activities are expected to absorb N360.11 million.
Financing activities are projected to contribute N1.21 billion.
Cutix said it expects customer cash receipts to represent approximately 95 percent of revenue, with the remaining 5 percent of sales made on credit.
The company also anticipates higher cash outflows for raw material purchases as copper prices rise.
Investment spending is expected to increase, particularly on property, plant and equipment, as the company seeks to expand production capacity.
The forecast further points to changes in financing activities associated with the repayment of commercial paper, although the company’s cash flow assumptions also anticipate additional funding from bank facilities.
House wiring cables drive projected revenue
House wiring cables are expected to remain Cutix’s largest revenue contributor in Q3, generating N3.38 billion, or about 79.4 percent of projected sales.
Power cables are forecast to contribute N256.57 million, while metal products are expected to generate N619.10 million. Panels and distribution boxes are projected to contribute N3 million.
The figures highlight the importance of house wiring cables to the company’s revenue base, while also showing its exposure to fluctuations in copper prices and other manufacturing costs.
Cutix manufactures and distributes electrical cables and related products to distributors, contractors, property developers, project owners and institutions across Nigeria.
