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Published On: Sun, Mar 11th, 2018

Corporate Nigeria sends mixed messages as companies release results


Investors in corporations listed on the Nigerian Stock Exchange (NSE) are having a sense of being between good times and bad times both at the same time as a growing number of companies release their operating results for the year ended December 2017. The heavenly signs looked good for some (Nestle Plc) and a bit ugly for others (Total Nigeria).

The Nigerian Stock Exchange

Most of the results released by companies showed an upward trending growth in both net sales and after-tax profit but the extent of the rise varied markedly from company to company. While the Food and Beverages sector seems to have had an earnings feast during the preceding year the oil and gas sector, though profitable, appears to have faced the difficult task of digging itself out of a hole.  Slowing economic growth (the economy grew by 1.4 per cent in the third quarter of the year and by 1.92 per cent by yearend) was mirrored by falling growth in consumer demand.

Slower demand for goods and services lent credence to analyst’s predictions that several companies would suffer major blowbacks in both revenues and profits by the end of last year. But those forecasts have not panned out as results released in the course of the last two weeks show a cheerier picture of corporate performance in the previous year.

Results made public so far show major leaps in after tax earnings by a handful of firms while a company like Total Nigeria had to take a 46% earnings shave. The results available for analyst’s scrutiny as at last week were those of Nigerian Breweries Plc, Total Nigeria Plc, Nestle Nigeria and Seplat Petroleum.

These stocks, financial analysts say, are income stocks because of their ability to generate value from dividend payouts especially.

Nestle Nigeria Plc

With a dividend of N42.50 per share for the year ended 2017, shareholders would ordinarily smile to the bank. Payment of N42.00 as dividend is unprecedented in the history of the capital market in Nigeria. However, this figure may look huge on the surface but amounts to only 3.05 per cent annual dividend yield, at a recent market price of N1.375.00 per share on March 7, 2018.

But the good news is that shareholders made a kill in capital gains. Every shareholder gained N745.99 per share as capital gains from Nestle Nigeria which closed at N1.555.99 on December 29, 2017 from N810 per share early in the year.

Nestle Nigeria Plc’s pre-tax profit for the year ended December 31, 2017 grew 117.3 percent to  N46.828 billion from N21.548 billion posted previously.

Its post-tax profit grew 325.5 percent to N33.723 billion from N7.924 billion declared in the corresponding period of 2016.

Revenue of Nestle rose to N244.15 billion from N181.91 billion recorded the same period of 2016; indicating a growth of 345 percent in the review period.

The company said that qualification date for its dividend is May 4, 2018; while closure date has been scheduled for May 8 to May 11, 2018 and payment date is May 23, 2018.

Total Nigeria Plc


With a dividend of N17.00 per share for the period ended December 2017, investors in petroleum giant Total Oil Nigeria Plc should be showing broad smiles on their faces. But on the contrary a growing number of stock market players have begun to scratch their heads in ultimate frustration as they try to figure out whether they are ahead or behind domestic inflation rate; real yields on local investments appear to have stayed negative.

Total’s dividend yield on current market price of N242.50 is 7 per cent. With year-on-year capital depreciation of 14.3 per cent (the stock fell from N283.00 in March 2017) the company slipped to a total negative yield of 7.3 per cent or an inflation adjusted yield of -22.4 per cent (based on a recent inflation rate of 15.1 per cent). This explains investors moodiness despite what does appear to be a nominally impressive dividend payout.  Totals nominal dividend yield is one of the highest published so far by any company listed on the Nigerian Stock Exchange (NSE).

The stock’s price fell by a painful 23 per cent in 2017. Investors therefore may be reconsidering their position in the stock as they try to rebalance portfolios for stronger overall yields. ‘’We have no reason to be happy. There is no gain for the year from Total Nigeria’’ said Mr. Fred Nwaogazi, a shareholder in the company.

How times change.

Total Nigeria’s results for the period ended December 2017 reveals that Revenues declined by 1% from ₦290 billion in 2016 to ₦288 billion. Following the same trend its Profit before tax fell sharply by 44 % from ₦20.3 billion in 2016 to ₦11.3 billion in 2017 while Profit after tax plunged by 46% from N14.7 billion in 2016 to ₦8.0 billion in 2017.

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Why the decline?

Chairman of the company, Stanislas Mittelman had blamed the poor performance of the oil giant the scarcity of PMS due to high landing cost compared to the template.

He reckoned that FX scarcity had hindered the importation AGO & ATK causing High financial costs due to increase in bank lending interest rates & reduction it’s our credit terms for PMS purchases. Mittelman explained that the price of PLATT was high making importation of PMS difficult given that the landing cost was higher than pump price. It became difficult for oil traders to import products as capacity diminished.

The problem also compounded in most part of 2017 when NNPC assumed the role of sole importer of PMS. This led to supply challenges and of course PMS shortages. Notwithstanding pump price remained N145 per litre throughout 2017.

The company also revealed that Since June 2016, Total had not been possible to directly buy dollars from the upstream sector and this has made doing business difficult for the company due to challenges procuring dollars for the importation of diesel and kerosene.

‘’In September there was an explosion at the NNPC Apapa jetty which made it impossible for Major marketers to receive products in Apapa until year end’’, it also said.

According to the company, Trade finance loans fell from ₦6.3 billion in 2016 to ₦3.5 billion in 2017. This may have led to an increased reliance on bank overdrafts which increased from ₦2.8 billion in 2016 to ₦9.5 billion in 2017. Interest rates on overdrafts also increased from 14% in 2016 to 19% in 2017.

The company noted that revenues decreased slightly from ₦251 billion in 2016 to ₦240 billion in 2017. Details show the company’s revenue show revenue from petroleum products declined from ₦251 billion in 2016 to ₦240 billion in 2017. During the year 2017 its lubricant business increased revenue from ₦38 billion in 2016 to ₦47 billion.

Reportedly, the company’s market share increased by over 2 percent from 25.7% in 2016 to 28.1% in 2017.

The performance of Total Nigeria had suffered a setback in 2010 when it recorded 57 per cent decline in profit after tax in first quarter.

Nigerian Breweries Plc

Nigerian Breweries paid a dividend of N4.13 per share for the year ended 2017. This amounts to 3.2 per cent at the stock price of N125.60 per share on March7, 2018. The company paid N2.58 as dividend in 2016. Shareholders may not be impressed with the yield from the investment. Unfortunately, there is no capital gains as the company’s stock lost -5 per cent from N142.00 on January 3, 2017 to close the year at N134.90 per share. Worse still the inflation has just dropped to 14.9 from 15.3 it stood in the third quarter 2017. The arithmetic here reveals that the yield has been eroded and put shareholders at a loss position.

Nigerian Breweries Plc, the giant brewer posted a profit after tax (PAT) growth for the period ended December 31, 2017 of 16.30 percent to N33.05 billion from N28.4 billion achieved last year.

Revenue of the company also increased 10 percent to N344.6 billion from N313.7 billion posted the corresponding year.

The company secretary/legal adviser Uaboi Agbebaku, in a statement said “whilst the foreign exchange situation improved in the course of the year, double digit inflation continued to impact both businesses and consumers. Nevertheless, the company was able to end the year with improved results through continuous focus and execution of the twin agenda of cost leadership and market leadership supported by innovation”.

Agbekaku said the board of the company maintained that whilst there are some early signs of improvement in the macro-economic condition, this is yet to be reflected in consumer confidence. “The Board remains confident that the Company has a clear strategy to deliver good return on investment to Shareholders as part of its commitment to Winning with Nigeria,” Agbebaku explained The dividend recommendation amounts to a total dividend N33 billion in 2017 compared to N20.5 billion paid a year earlier.

Nigerian Breweries said its closure date for dividend is March 7 to March 13, 2018; while qualification date is March 6, 2018 and payment will be made on April 23, 2018

Seplat Petroleum Development Company Plc

Seplat Petroleum Development Company Plc, a dual listed Nigerian oil and gas upstream firm,  reported a pretax profit increase of 126 percent to N13.45 billion in its  full year 2017 financial results compared to a loss of N47.42 billion recorded a year ago.

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The company also reported a post-tax profit of N81.11 billion compared to a loss of N45.38 billion posted in full year 2016; indicating a growth of 260 percent.

Revenue of the first dual listed Nigerian oil and gas upstream firm increased 78 percent to N138.28 billion from N63 billion reported the same period of 2016.

“I am pleased to report that Seplat made a return to full-year profitability in 2017, registered strong cash flow performance and significantly strengthened the balance sheet. In a year of contrast we were plagued throughout most of the first half by force majeure at the Forcados terminal.  However, following the lifting of force majeure on 6 June we rapidly restored full production operations and our subsequent operational and financial performance is a clear indicator of our strong fundamentals and what we can achieve when we have unhindered access to market’’, said Austin Avuru, Seplat’s Chief Executive Officer of Seplat.

Seplat did not pay any dividend but enjoyed capital gains of N246.23 per share as stock price rose from N379.99 in January 3, 2017 to N626.22 per share in December 2018.

NASCON Allied Industries

NASCON proposed to its shareholders a dividend of  N1.50 per share representing a dividend yield of 6.11 percent based on March 8, 2018 close price at the trading floor of the Nigerian Exchange and 114.3 percent increase compared to N0.70 per share paid in 2016 end. Shareholders also gained 117.64 per cent from N8.50 per share in January 3, 2017 to close at N18.50 per share on December 29, 2017.

The company posted profit after tax (PAT) for the period ended December 31, 2017 grew 121.25 percent to N5.34 billion from N2.41 billion in the corresponding period of 2016.

Similarly, pretax profit of NASCON increased 124.94 percent to N7.91 billion from N3.52 billion declared the same period of 2016.

The company’s revenue moved up from N18.29 billion in 2016 end to N27.06 billion recorded in the review period of 2017; showing an increase of 47.96 percent.

Managing Director of HIGH CAP Securities limited, Mr. David Adonri reckons that the companies have performed impressively.

However, these companies have confided in stakeholders that they have been having deep challenges emanating from the tough macro-economic environment in Nigeria. These analysts believe include the volatility of the forex market, high lending rates which hovers between 25 and 30 per cent. Other challenges are shrunken revenues, unemployment, high inflation which has gradually come down from 15.9 to 14.9 per cent.

Analysts believe the weak performance is hinged on the harsh operating environment which does not appear favourable to the manufacturing sector. They added that cost of operation remains very high given the lack of power.

Some observers sympathise with the manufacturing sector as they attribute its predicament to ill-advised government policies that have crippled manufacturers and allowed little wriggle room for them to manoeuvre out of a high cost manufacturing situation.  The weakness of the domestic currency in the foreign exchange market and foreign exchange access restrictions placed on 41 categories of imports conspired to make a bad situation worse as the company had to seek foreign exchange from the parallel market where foreign currencies were sold at premiums above 60 per cent of official market rates

The economy is emerging stronger given the latest figures from the Nigerian Bureau of Statistics (NBS) that Nigeria’s Gross Domestic Product (GDP) has grown by 1.9 per cent, a sign that economic activities may be picking up after a deep recession through 2016. The price of crude has been relatively stable, hovering between $60 per barrel and above. The volume of production has also been stable given the relative peace in the Niger Delta. In fact, it is speculated that Nigeria pumps about 2million barrels per day presently.

There has also been some reprieve from the creative handling of Forex by the Central Bank of Nigeria (CBN) which introduced the Nigerian Autonomous Foreign Exchange Rate Fixing Methodology (NAFEX). The CBN created the new window to boost liquidity in the foreign exchange market and ensure timely execution and settlement for eligible transactions.  This window appears to have attracted more portfolio investors into the market. Those who had, hitherto pulled out of the financial market during the recession in 2016 seem to be returning in droves. These have helped in no small way to create some level of confidence in the economy.

As the days progress and more results tumble onto the floor of the NSE, investors may begin to achieve a more stable attitude towards the market as the grey shadows that masked their earlier smiles give way to laughter.


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