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Saturday, August 13, 2022

Investors Wager on Julius Berger’s Stock as Economic Reopening Bolsters Earnings

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Investors are betting Julius Berger’s stock has room to rally and such optimism is predicated on an economic opening that bolstered earnings and government planned infrastructure spending binge.

Construction sites that were once desolate are getting busier nowadays with workers, machines and trucks since the relaxation of social distancing measures imposed by the government to curb the spread of the coronavirus pandemic.

The gradual economic recovery has shown face in the books of Julius Berger as the largest construction company by market capitalization in Africa’s most populous nation posted net income of N9.36 billion in December 2021, which is much higher than 2020’s N1.35 billion.

Revenue followed the same growth trajectory as it spiked. Julius Berger’s stock closed trading at N25.25 per share Thursday. The stock is up 27.84 percent in the past year.

It must be noted that save for 2016 when the construction giant recorded a loss of N2.39 billion due to the precipitous drop in crude oil price of mid-2014 that tipped the country in its first recession in 25 years in 2016, it has been recording profit.

Operating profit spiked by 75.64 percent to N24.67 billion in the period under review from N14.06 billion the previous year.

Gross profit followed the same growth trajectory as it spiked by 40 percent to N61.03 billion in December 2021 from N43.61 billion the previous year.

Interestingly, Julius Berger is efficiently good in generating returns on the investment it received from its shareholders.

Return on average equity (ROAE) increased to 18.85 percent in the period under review from 3.17 percent the previous year. Net profit margin, a measure of efficiency, moved to 2.76 percent in December 2021 from 0.56 percent the previous year.

Julius Berger is in the forefront of the government campaign to shrink the infrastructure deficit that undermines economic growth.

President Muhammadu Buhari has stated that Nigeria requires the sum of $1.5 trillion in ten years to close its infrastructure gap.

As economic and construction activities accelerate on the back of successful vaccinations Julius Berger is ramping up capital expenditure spending.

It acquired property plants and equipment worth N32.36 billion as at December 2021, which represents a 230.87 percent surge in 2020’s N9.78 billion.

To magnify and diversify earnings streams, the leading construction giant has made a bold diversification of its investment portfolio into cashew processing, in the agricultural sector of the nation’s economy.

“Clear national occupational standard and demand-driven international product quality would define and drive the company’s operations,” said Julius Berger’s Cashew Project’s Commodity and Marketing Manager, Oyindamola.

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