Nigeria’s top 30 listed firms earn N612 bn in Q2 2017
Nigeria’s largest listed firms are enjoying a healthy growth in their profits despite a struggling economy.
Net income for the NSE – 30 which tracks the top 30 listed firms on the Nigerian Stock Exchange (NSE) in terms of market capitalisation and liquidity, spiked by 78 percent in June 2017 to N610.77 billion, from N345.91 billion in the comparable period of 2016.
“Due to the improved liquidity in the foreign exchange, the companies did not have to make any significant provisions, which helped stabilise their bottom lines, said Ayodeji Ebo, managing director and Chief Executive Officer of Afrinvest Securities Limited.
“For banks, the trade cycle has contracted from an average of nine months to less than six months, which has resulted in improved turnover. We expect them to maintain the momentum.”
The NSE top 30 stocks have a market capitalisation of N11.676 trillion, equivalent to 95 percent of the total stock markets capitalisation of N12.3 trillion, making them largely unrepresentative of the underlying economy.
Dangote Cement alone, takes up a big chunk of that capitalisation, accounting for about 27.3 percent of the market.
In the period, the top five listed firms saw a surge in profits, including Dangote Cement by 39 percent, Nigerian Breweries (+25%) Guaranty Trust Bank (+17%), Nestle (+2,988%) and Zenith Bank (+112%).
Profit growth for the firms comes despite sluggish economic expansion which saw Gross Domestic Product (GDP) rising by only 0.55 percent for the same period, the first positive growth recorded by the country in five quarters.
The growth in corporate profit was underpinned by the financial sector, as all the lenders recorded double digit growth, thanks to improved yields in the loan book that drove interest income.
Major players in the oil palm industry, Okomu (+73% ) and Presco (+84%) saw profit spike on the back of the devaluation of the currency and the ban on palm kernel oil, which undermined the sales of competitors.
Fast Moving Consumable Goods (FMCG) firms were also in a growth spurt in the period under review, as a hike in the price of key products underpinned sales.
Oando Nigeria Plc, with profit growth of 117 percent, Lafarge Africa Plc (+165%), International Breweries Plc (+182%), Transnational Corporation of Nigeria (+154%) Guinness Plc (+195%), and Julius Berger Plc (+120%), reverted to the path of profitability in 2017 after an economic downturn plunged them into a loss position last year.
However, most downstream oil and gas firms saw profits dip in the Q2, 2017 period, including NSE-30 firms, Total (-48%) and Mobil(-43%) as the decision by the Federal Government to make the Nigerian National Petroleum Corporation (NNPC) sole importer of petroleum products crimped cash flow.
“These firms used to make money when they imported petroleum products directly, and sell to other smaller marketers,” said Dolapo Oni, head of Energy Desk at Ecobank Plc.
“Now, when you don’t sell, you don’t get money,” said Oni.
While an improvement in corporate profits and stock markets is usually a leading economic indicator, the skewed nature of the Nigerian Stock Exchange and dominant positions of the NSE 30 firms make this largely not the case, as large sectors of the economy, such as telecommunications (ICT) which are not listed on the bourse, remain mired in recession.
The ICT sector, which makes up 12.39 percent of GDP, contracted by 1.15 percent in Q2 2017.
Firms operating in the sector including MTN and Etisalat Nigeria (now 9 mobile) have had challenging operations in 2016, with MTN reporting a loss and Etisalat (9mobile) defaulting on debt obligations to creditors.
The introduction of the Investors’ and Exporters’ window and the subsequent liberalisation of the foreign exchange market, was a boon for the large firms listed on the stock exchange.
The International Monetary Fund (IMF) forecasts growth of 0.8 percent this year, as output of oil climbs, and supply of foreign currency, needed by manufacturers to import inputs, continues to improve.
The Nigerian All Share Index has gained 33.7 percent since the start of the year, underpinned by gains in banking sector and industrial stocks.
Seven Up Bottling Plc with a slide in profit growth (-416%) and Seplat Petroleum Development Corporation (-36%) bucked the trend to record losses of N2.45 billion and N8.45 billion for the period, respectively.
Overseas demand is also helping to drive profit growth for Nigerian corporates with firms like UBA, Dangote Cement, getting up to 30 percent of their revenues from the rest of Africa operations.
PATRICK ATUANYA & BALA AUGIE
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