Naira Depreciation: Corporate organizations lost 26% in first half 2016
Corporate profit across
various sectors has taken a huge nose-dive due to recent depreciation in Naira
value as well as other harsh operating environment which increased costs and
narrowed their profit margins.
According to reports filed by 85
companies to the Nigerian Stock Exchange, NSE, for their financial results in
the first half of the year, total profit dropped by N105.8 billion to N291.96
billion, a massive 26.6 per cent decline from N397.8 billion they recorded in
the corresponding period of last year.
The huge drop came despite a
marginal increase in the companies’ total revenue which, at N2.5 trillion,
represented a 4.8 per cent improvement against N2.4 trillion recorded in the
same period last year. The Nigerian arm of the cement multinational corporation,
Lafarge Africa Plc, led the pack of bad results with a loss of N30.2 billion,
as against a profit of N30.8 billion in the corresponding period last year.
The company’s revenue was also
bad with a 29.4 per cent drop to N107.4 billion as against N152.2 billion
reported about this time last year. The management of the cement giant said its
result was affected by the impact of the Naira devaluation resulting in an
unrealised exchange loss amounting to about N28 billion arising from dollar
borrowings which at the first time of the devaluation consisted of USD310
million shareholder loans and USD85 million external loans. They also said gas
supply shortage impacted its sales volume, hence the significant drop in
revenue for the period under review.
Next among the most adverse
results came from the oil giant, Oando Plc, with a huge loss of N27 billion
despite an equally huge rise in its revenue to N212 billion, about 17.8 per
cent against N180 billion it recorded at same period last year. One-off unrealized
foreign exchange loss of N28.6 billion from dollar denominated liabilities as a
result of currency devaluation, in addition to the Niger Delta militancy crises
were responsible for the abysmal results of the oil company.
In a communication sent to the
Nigerian Stock Exchange two days ago, Mr. Wale Tinubu, Group Chief Executive,
Oando PLC said: “The first half of the year has attested to the deplorable
state of security in the oil & gas environment in Nigeria, having
experienced a 25% decline in production volumes arising from the increased
disruptions from militant activities”. The company was also affected by huge
debt servicing obligations but Tinubu informed that the company has benefitted
from the implementation of the oil price hedge, which has helped to calm the
effects of the disruption of production activities and aided in the rapid pay
down of the USD900 million of Upstream related liabilities at the time of the
Conoco Philips Acquisition, to USD440 million currently.
In the third position of bad
results was Transcorp Plc, one of Nigeria’s leading conglomerates, which
recorded N12.2 billion loss despite an impressive rise in revenue. The
company’s revenue rose 22.1 per cent to N24.8 billion from N20.3 billion in the
corresponding period of 2015. The company has also blamed foreign exchange
translation losses for its woes.
It recorded a N14 billion loss in
the exposure of the group to US Dollar obligations in its subsidiary, Transcorp
Power Limited. The company also said the generating capacity of the power
subsidiary declined significantly due to shortages in gas supply since February
2016 where capacity was forced down from 600mw to 280mw daily. On the flip side
there were mixed outcome as the companies with largest profits still recorded
declines against the corresponding period of last year.
Dangote Cement Plc led
the pack of huge profit makers with N124.9 billion in the first half of this
year, but that was about a 3.0 per cent decline from last year’s figure of
N128.73. Explaining its results to the Nigerian Stock Exchange, the managing
director, Onne van der Weijde, said “we have achieved a commendable result,
given the very challenging situation in our main market and general economic
weakening across Africa. “Following the price cut we introduced last September,
sales of cement in Nigeria continued their strong momentum and reached record
levels of nearly 8.8 million tonnes, most of which was driven by smaller-scale
building. This explained why the sales volume rose with over 20 per cent rise in
revenue.”
However, the company added that due to the recent shutdown of oil and
gas pipelines in Niger Delta region because of militant attacks, it was there
forced to rely on more expensive alternative fuels to power its plants.
This
caused the company’s operating margins and net profit to fall, amidst growing
sales volume. The French oil mulitinational, Total Nigeria Plc, led the pack in
impressive rise in performance as profit surged 251.5 per cent to N12.9 billion
from N3.68 billion just as revenue rose by 29 per cent to N145.5 billion
against N112 billion recorded last year. First City Monument Bank, FCMB,
recorded 96.2 per cent rise in profit at N16.3 billion against N8.3 billion in
the corresponding period of last year.
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