Julius Berger surmounts headwinds as free cash flow hits N30.60bn
Julius Berger Plc, Nigeria’s largest construction firm by market value, has enough cash to fund future expansion plans, pay dividend, and reduce debt.
Julius Berger’s free cash flow surged to N30.60 billion in December 2017 from a negative figure of N6.98 billion as at December 2016.
Prompt payment by customers and a significant reduction in foreign exchange acquisition losses propelled the company’s cash position while adding impetus to earnings.
The year 2016 was horrendous for the construction industry as lower oil price, accelerated inflation, naira devaluation and a shortage of foreign currency undermined operating performance.
Increased operating costs, foreign exchange losses combined with reduced spending by client also squeezed the industry.
Government spending on capital projects dipped as the price of crude oil, the country’s mainstay, continued to be volatile between 2015 and late 2016. Delay in the submission and approval of the 2015, 2016 and 2017 budgets over dispute between the executive and legislators compounded the woes of Julius Berger and other players in the industry.
The introduction a new foreign exchange trading window for investors by the central bank in April 2017 and a rebound in crude oil price and production ameliorated the pains of businesses as dollars became available.
The gross domestic product of Africa’s largest oil producer expanded for three straight quarters last year after a 1.6 percent contraction in 2016, with year-on-year growth reaching 1.9 percent in the final three months of 2017.
The gradual economic recovery showed face in the numbers of Julius Berger as the company recorded a profit after tax of N2.57 billion in December 2017 from a loss position of N2.39 billion the previous year.
Julius Berger’s bottom line (profit) was also underpinned by a dividend income of N1.12 billion while foreign exchange losses dipped by 77.23 percent to N3.25 billion in the period under review.
Sales were up 45.39 percent to N141.89 billion in December 2017 while costs of sales increased by 15.27 percent to N97.59 billion in the period under review.
Earnings before interest and taxes (EBIT) declined by 48.30 percent to N8.68 percent in December 2017 from N16.79 billion as at December 2016.
Julius Berger will have to use its free cash to pay up debt as a debt to equity ratio of 11.13 percent means the proportion of debt in the capital structure of the firm is high.
Despite the tough and unpredictable macroeconomic environment and dearth of viable project in the market, Julius Berger and its subsidiaries were still successful in acquiring several projects.
The Company’s new awards included the Port Harcourt Government House and Pleasure Park, a multifunctional leisure and recreational park, several building projects and the rehabilitation of the runway at the Nnamdi Azikiwe International Airport in Abuja as well as the rehabilitation of various roads in Port Harcourt and Lagos.
The company share price closed at N24.80, valuing it at N32.73 billion.
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