GTCO, Presco, Okomu, FCMB See Improvement in Operating Efficiency

Some firms such as GTCO, Presco are cutting back on expenses while increasing sales even amid a challenging environment as they have maintained low operating expenses (OPEX) to sales ratio.

The OPEX to Sales ratio of GTCO which stands at 23.41 percent is the lowest among the NGXASI 30 index of the most capitalised and liquid firms. This means that the lender spent 23kobo to create sales.

That’s followed by Presco Oil Plc; 26.67 percent; OKomu Oil Plc, 26.62 percent; First City Monument Bank (FCMB) Plc, 0.28; Zenith Bank, 29.15 percent; United Bank for Africa (UBA) Plc, 32.16 percent;  FBNH, 33.02 percent; Stanbic IBTC Holdings, 35.76 percent; Access Bank Plc, 35.60 percent; Fidelity Bank, 36.72 percent, and MTN Nigeria, 39.12 percent, according to MoneyCentral calculations.

It is important to note that the improved efficiency is due to revenue growth and cost control measures put in place by owners with a view to bolstering profit margin.

An anomaly is GTCO whose gross earnings dipped by 23.10 percent, but the lender has always been a cost leader in the banking space, boosting one of the highest return on equity and lowest cost to income ratio.

All companies on the NGXASI index operate in a tough and unpredictable macroeconomic environment. In the last two years, inflation has been skyrocketing on the back of the removal of subsidy on fuel and the unification of the foreign exchange market that saw a sharp depreciation in the value of the Naira.

Consumer goods firms are the hardest hit from the cost pressures as they have the highest ratio.

For instance, Dangote Sugar has spent 99kobo to create every N1 of sales, combined with huge foreign exchange revaluation losses helped tipped the producer of the sweetener over the edge.

International Breweries has spent 81kobo to create every N1 of sales, leaving the company with a slim profit margin.

Nigerian Breweries Plc, 77.81 percent; Nestle Nigeria Plc, 74.95 percent; Julius Berger has a ratio of 97.45 percent, while Lafarge Africa and Airtel Africa have 71 percent apiece.

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