Market Sheds N393bn as Weak Earnings Keep Investors Away

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WEEKLY REPORT

By Goddy Egene and Nosa Alekhuogie

The Nigerian equities market declined for the fourth consecutive week as weak second quarter (Q2) corporate earnings,  news of profit warning and  notification of   late filings of results combined to further dampened investors’ sentiments.

After falling by 0.17 per cent the previous week, it was expected that Q2 corporate numbers will lift the market last week. However, that was not to be as most of the companies turned in weak performances.

Unilever Nigeria Plc, Cadbury Nigeria Plc and Courtville Business Solutions Plc recorded decline in Q2 bottom-lines, while Lafarge Africa Plc ended the period with a loss. In reaction to this development, most investors stayed away from the market. Consequently, the   Nigerian Stock Exchange (NSE) benchmark index, the All-Share Index (ASI) fell by 3.98 per cent to close at  27,659.44, while market capitalisation shed N393 billion to be at N9.5 trillion.

Similarly, all the sectors closed lower except the NSE Consumer Goods index, which appreciated 0.9 per cent on the account of gains recorded by Nigerian Breweries Plc. But the NSE Banking index led others, falling by 7.3 per cent, followed by the NSE Industrial Goods Index   that depreciated by 7.1 per cent. The NSE Insurance and NSE Oil & Gas Indices went down by 3.1 per cent  and 0.9 per cent  respectively.

 Daily   Performance Summary

The market resumed on Monday on bearish note with the NSE ASI depreciating   by 0.25 per cent to close at 28,733.90 points, compared with the gain of 0.36 per cent on Friday. The depreciation recorded in the share prices of Lafarge Africa, Oando Plc, Ecobank Transnational Incorporated, Cadbury Nigeria Plc and FBN Holdings were mainly responsible for the decrease recorded in the index. Similarly, the market capitalisation depreciated by 0.25 per cent to close at N9.87 trillion.

On Monday, Oando Plc sent a profit warning to the market, saying it would record lower earnings for the  Q2  ended June 30, 2016. According to the company,  the lower earnings  would result from the  impact of the Naira devaluation by the Central Bank of Nigeria (CBN)  that is expected to  amount to an unrealised foreign exchange loss arising from United States dollars (USD) denominated liabilities, outstanding bank trade facilities as well as vendor payables.

 “As at the time of the devaluation the company had USD denominated borrowings of $260 million in our Naira dominated earnings businesses, consisting of ~$68 Million in core loans, $89 million in bank trade facilities, $83 Million in asset financing and $21 million in other payables. A   40 per cent devaluation in the value of the Naira against the US dollar from the bank rate of N199.00:$1.00 to N280.00:$1.00, has effectively resulted in these significant foreign exchange losses which we have prudently booked into our financial statements,” Oando said.

The  bearish sentiments were sustained on Tuesday as the NSE ASI  declined by 0.9 per cent to  close at 28,488.56 points whilst market capitalisation contracted by N84.2 billion  to settle at N9.7 trillion.  The market   was dragged by further selloffs in Guaranty Trust Bank (-4.0 per cent), Lafarge Africa Plc (-3.0 per cent), ETI (-5.1 per cent) and Zenith Bank (-1.7 per cent) likely due to recent notifications of late filling of Q2:2016 results.

The market   declined further on Wednesday, falling by 0.94 per cent to be at 28,221.18 points. Market capitalisation shed N91.8 billion to be at N9.7 trillion. The bears were attracted by Dangote Cement Plc(-1.3 per cent), Zenith Bank Plc  (-4.0 per cent) and Oando Plc (-9.6 per cent). Market activity revved up  as volume and value traded appreciated 28.0 per cent and 33.4 per cent to close at 309.7 million  units and N2.1 billion respectively.

Similarly, trading on Thursday remained bearish, leading to a decline of 0.79 per cent to close at 27,997.29. The depreciation recorded in the share prices of Zenith Bank, GTBank, Nestle, FBN Holdings and Guinness were mainly responsible for the loss recorded in the index.  The total value of stocks traded was N1.80 billion, down by 13.53 per cent from N2.08 billion recorded the previous day.

On Friday, which was the last day of the week, the market shed 1.21 per cent to close at  27,659.44 points. The depreciation recorded in the share prices of Access Bank, Dangote Cement, Flour Mills of Nigeria Plc, FBN Holdings and Stanbic IBTC were mainly responsible for the decline.

 

Market turnover

Meanwhile, market recorded a turnover of 1.350 billion shares worth N9.287 billion traded in 18,679 deals last week, compared with  of 1.149 billion shares valued at N13.616 billion that exchanged hands  the previous week  in 21,868 deals.

The Financial Services Industry maintained its leadership of the activity chart in volume terms with 1.148 billion shares valued at N4.861 billion traded in 11,668 deals, thus contributing 85.01 per cent and 52.34 per cent to the total equity turnover volume and value respectively. The Conglomerates Industry followed with 73.190 million shares worth N238.895 million in 1,058 deals. The third place was occupied by the Consumer Goods Industry with a turnover of 60.336 million shares worth N2.409 billion in 3,041 deals.

Skye Bank Plc, United Bank for Africa Plc and FBN Holdings Plc accounted for  573.927 million shares worth N1.250 billion in 3,745 deals, contributing 42.51 per cent and 13.46 per cent to the total equity turnover volume and value respectively.

Also traded during the week were a total of 11,420 units of Exchange Traded Products (ETPs) valued at N136,400.05 executed in 42 deals, compared with a total of 941 units valued at N2.646 million transacted last week in 22 deals.

A total of 13,550 units of Federal Government Bonds valued at N14.061 million were traded in 6 deals compared to a total of 44,381 units of Federal Government Bonds valued at N44.679million transacted last week in five deals.

Gainers and losers

Meanwhile, 15 equities appreciated in price during the week, lower than twenty-two (22) equities of the previous week. Forty–four equities depreciated in price, higher than thirty-eight (38) equities of the previous week, while 121 equities remained unchanged higher than 120 equities recorded in the previous week.

Skye Bank Plc emerged the highest price gainer as bargain hunters swooped on the stock after declining to record low. The stock rose by 41.6 per cent to close at N0.85 per share. The stock took an unprecedented   plunge when the CBN intervened in the bank, replacing its board and management at the beginning of this month. However, investors who see some prospect after the stock dipped to N0.60, renewed demand that led to the 41.6 per cent recovery last week.

Forte Oil Plc closed as the second highest price gainer with 8.1 per cent, while Premier Breweries Plc went up by 4.98 per cent. Others among the top 10 gainers included:  Berger Paints Nigeria Plc (4.97 per cent); Transnationwide Express Plc(4.95 per cent); Redstar Express Plc (4.88 per cent) and A.G. Leventis (Nigeria) Plc (4.30 per cent); Wema Bank (4.0 per cent); International Breweries Plc (3.1 per cent) and Nigerian Breweries Plc (2.98 per cent).

Conversely, Oando Plc led the price losers with 25.6 per cent, trailed by Livestock Feeds Plc (17.7 per cent). Stanbic IBTC Holdings Plc shed 16.13 per cent. Ecobank Transnational Incorporated went down by 14.5 per cent, just as United Capital Plc shed 14.2 per cent.

Other losers were: Law Union & Rock Insurance Plc (13.3 per cent); Diamond Bank Plc (11.6 per cent);Honeywell Flour Mills Plc (11.6 per cent) and  Fidson Healthcare Plc (11.1 per cent).