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Friday, March 24, 2023

Corporate Nigeria’s Profit Jumps 33.10% to N1.07 trillion in Second Quarter

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Big Nigerian companies have recorded a mammoth rebound in profit during the second quarter earnings season, underscoring the scale of the recovery in corporate Nigeria’s fortune since the depth of the pandemic.

The NGX 30- the list of top 30 companies in terms of market capitalisation and liquidity-collectively grew profit by 33.10 percent to N1.07 trillion, from N756.63 billion a year earlier according to data gathered by MoneyCentral.

The NGX 30 All Share Index has lost 1.44 percent since the start of the year, but it has outperformed the NGX All Share Index which is down -3.47 percent

In short, 66.67 percent of firms that have reported half-year results have seen earnings grow, and analysts are optimistic that they will maintain the upward trajectory all through the end of the year.

The earnings season witnessed the resurgence of some consumer goods firms who had capitulated due to deteriorating consumer purchasing power brought on by inflationary pressure, rising energy cost, spiraling utility bills, and currency volatility.

For instance, the combined net income of the largest consumer goods firms spiked by 136.83 percent to N54.19 billion as at June 2021.

Guinness Nigeria and Unilever posted net income of N1.24 billion and N714.78 million from loss positions of N12.69 billion and N519.12 million respectively.

Analysts have attributed those rebounds to the relaxation of the social distancing measures that invigorated business activities after a long hiatus, improved vaccination, and hike in the products by some entities to compensate for rising input costs.

The Nigerian economy grew by 5.01 percent in the second quarter of 2021, according to data from the National Bureau of Statistics (NBS).

The country’s inflation rate in the month of August 2021 dropped to 17.01% from 17.38% recorded in July 2021. This represents the fifth consecutive decline in the rate of inflation recorded in Nigeria.

Investors pay attention to the bottom lines (profit) of companies because they want to be sure they will be paid bumper dividends or whether most of the earnings will be plunged back into the business to finance future expansion plans.

Dangote Cement, Lafarge Africa, and BUA Cement collectively grew net income by 46.63 percent to N240.98 billion as at June 20121, thanks to strong demand for building material on the back of real estate investment and acceleration in construction activities.

Analysts are upbeat that a further price adjustment and low interest rate environment will add impetus to future earnings.

They, however, remain cautiously optimistic given the currency volatility and negative connotation for cost.

Seplat Energy, the largest downstream oil and gas firm by market capitalisation, saw a 32.1 percent year on year (y/y) and a 404.4 y/y increase in topline (sales) and bottom line (profit) to close at $303.8 million and $36.1 million.  The strong performance was mainly bolstered by increased crude and gas sales which were spurred by the global economic recovery

Brent crude oil now stands at $75.50 a barrel as of September 17, while West Texas Intermediate (WTI) is $72.67.

Analysts at United Capital expect ANOH, SEPLAT’s gas processing plant, scheduled to resume in the second quarter of (H1) 2022, to boost the company revenue drive, bolster its gas expansion plans and its gas supply to the Nigerian power grid.

“Furthermore, in 2022, We expect gas revenue to improve due to the expected increase in electricity tariffs following the expected implementation of the Multi-Year Tariff Order,” said analysts at United Capital.

MTN Nigeria, the largest telecommunications company by market capitalization, saw net income spike by 49.98 percent to N141.82 billion as at June 2021.

But analysts at Chapel Hill Denham are of the view that the financial technological companies are the likely growth drivers as subscriber growth is subdued by regulatory headwinds.

While the strong internet subscribers buoyed by growing young population and the proliferation of mobile phones are expected to support earnings all through the end of the year, operating profit will be largely affected by currency devaluations.

 The banking sector saw slow growth in earnings as the hike in the cash reserve ratio and other stringent rules have set chief executive officers off in fear and trepidation.

For instance, the combined net income of sector operators increased by a mere 3.46 percent to N514 billion in June 2021 from N496.96 billion as at June 2020.

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