Julius Berger Plc has recorded its worst performance in close to a decade after many building sites closed and the supply of workers, materials and safety equipment was heavily disrupted by the coronavirus pandemic.
The largest listed construction company in Africa’s largest economy posted a loss of N1.93 billion as at June 2020 from N2.83 billion profit it recorded the previous year.
Sales dropped by 48.022 percent to N68.85 billion as at June 2020, from N102.055 billion in June 2019.
That poor performance brings back the dark memories of 2016, when the precipitous drop in crude oil price of mid-2014 stoked a severe dollar scarcity that paralyzed business and tipped the country into its first recession in 25 years.
There has been a slowdown in construction activities in the country due to the lockdown imposed by government to curb the spread of the virus that has ravaged economies across the globe.
Production problems and restriction on the movement of people and goods are causing major shortages of materials and workers for the industry.
The Federal Government has slashed capital expenditure spending by 15 percent in the 2020 revised budget, citing reduction in revenue stoked by slump in global demand for crude oil.
Julius Berger recorded a negative free cash flow from operating activities of N6.51 billion as at June 2020, as cash paid to suppliers and employees exceeded receipt from customers.
The company recorded an operating loss of N319.16 million in the period under review, thanks to rising expenses, receding sales, and a foreign exchange loss of N3.10 billion.
Many companies in the building material industry have scaled back on acquisition of property plant and equipment due to uncertainties stoked by the coronavirus pandemic.
Capital expenditure spending reduced by 3.49 percent to N5.80 billion in the period under review from N6.04 billion the previous year.
Julius Berger could however benefit from FG plans to construct about 300,000 homes in the next 12-months coupled with renewed commitment toward the construction and maintenance of federal highways, roads and bridges, road interventions within federal tertiary institutions across the country.
The construction industry is a barometer for economic growth because the industry employs thousands of people of in a country reeling from high unemployment rate.
The International Monetary Fund (IMF) has announced that the Nigerian economy would witness a deeper contraction of 5.4 percent and not the 3.4 percent it projected in April 2020. But the global lender expects Nigeria’s economy to rebound by 2.6 percent in 2021.