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Friday, December 8, 2023

Transnational Corporation of Nigeria: Inside the World of the Most Profitable Conglomerate

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Many experts have said that conglomerates do not thrive in a harsh and unpredictable macroeconomic environment, they are on point, given unstable exchange rates, spiraling inflation, decrepit infrastructure, and corruption.

These analysts are spot on because companies such Leventis, GBO, SCOA, Mandilas, CFAO, UAC, and PZ Cussons are no longer in the top reckoning anymore as they have fallen off the cliff.

But Transnational Corporation of Nigeria or Trancorp, the largest conglomerate by market capitalization listed on the NGX, has remained resilient even amid two recessions in five years.

Transcorp, the company with interest in oil and gas, hospitality, Agric, and agro allied, and power, has been impervious to macroeconomic shock since last year, but it has had its own fair share of economic uncertainties that it surmounted.

Since its investment in power business in 2013, Transcorp has contributed immensely to the country’s power generation.

And little wonder the company was awarded the International Standards Excellence Awards for Best World Class Energy/Power Brand of 2021.

The award was in recognition of the corporation’s phenomenal contributions to Nigeria’s power sector through its power businesses – Transcorp Power Limited and Trans Afam Power Limited.

The hospitality business is thriving, as the corporation committed $120 million into the construction of new hotels across the country. In short, it is the largest hotel by market capitalisation, revenue, and total assets in Africa’s largest economy.

The good news is that the shareholders will be getting bumper dividends because the conglomerate has significantly magnified profit even amid the coronavirus pandemic crisis that sent shock waves across the globe.

Taking a cursory look at the books of the company shows net income surged by 673.56 percent to N13.46 billion in September 2021 from N1.74 billion as at September 2020.

It is noteworthy that it is one of the fastest profit expansion among NGX 30 firms, the list of the most capitalised and liquid companies in Nigeria.

It is generating profit from core operations as earnings before interest and taxation (EBIT) followed the same growth trajectory as it surged by 77.20 percent to N27.52 billion as at September 2021.

The conglomerate is efficient at using its labor and supplies in producing goods or services as gross profit spiked by 73.23 percent to N39.23 billion as at September 2021.

Of course, the performance at the top line (sales) was grandiose, which validates strong margin expansions.

Sales were up 57.40 percent to N85.58 billion in September 2021 from N54.37 billion as at September 2020.

A breakdown of the top line shows revenue from energy sent off increased by 55.59 percent to N46.43 billion as at September 2021 from N29.83 billion the previous year.

Transcorp is able to turn each Naira invested in sales into higher profit as evidenced in profit margin expansion.

Net profit margin increased to 15.73 percent in September 2021 from 3.21 percent the previous year.

Operating profit margin rose to 32.16 percent in the period under review from 28.57 percent the previous year.

Gross profit margin increased to 46 percent in September 2021 from 41.79 percent the previous year.

Shareholders should be expecting steady returns because the company’s income is well diversified across the key sectors of the economy, which also gives it the leeway to overcome macroeconomic headwinds.

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