Capital market
With the ease of COVID-19 epidemic restrictions, and the International Monetary Fund (IMF) projection that Nigeria’s economy is expected to grow by 3.7 per cent in 2022, supported by higher oil prices, gradual easing of the Organisation of Petroleum Exporting Countries (OPEC) production cuts and improved management of the pandemic, companies in Nigeria have emerged stronger in revenue and it has trigged N616.16billion profit in the first quarter (Q1) of 2022. In this report, Kayode Tokede examines 24 listed companies’ improved performance in profit that has lifted some stocks on the Nigerian Exchange Limited (NGX)
Amid the easing of lockdown and total removal of restriction measures on the COVID-19 epidemic, a total of 24 fundamental companies have reported N615.16billion profit in the first quarter (Q1) ended March 31, 2022, an increase of 21 per cent from N513.14billion reported in the first quarter of 2021.
The 24 companies’ unaudited financial statements for Q1 revealed a significant increase in revenue but a steady increase in inflation drives total operating expenses in the period under review.
The 24 companies consist of; 12 commercial banks, three cement manufacturing companies, four Fast-Moving consumer goods companies (FCMG), one brewery manufacturing company, two petroleum marketing companies, and one construction/telecommunication company.
Dangote Cement, MTN Nigeria, and Zenith Bank Plc are the most profitable listed companies on the Nigeria Exchange Limited (NGX) by value, according to THISDAY findings.
For instance, Dangote cement reported a nearly 18 per cent increase in profit to N105.85billion in Q1, 2022 from N89.71billion in Q1 2021, while MTN Nigeria reported an N96.82 billion profit in Q1 2022, an increase of 31.3per cent from N73.75 billion reported in Q1 2021. In addition, Zenith Bank grew its profit by nearly 10 per cent to N58.2billion in Q1, 2022 from N53.06billion in Q1 2021.
A telecommunication giant, MTN Nigeria Communication reported a 31.3 per cent increase in profit to N96.82billion in Q1 2022 from N73.75billion in Q1 2021.
The sectorial performance also revealed that listed commercial banks on the Exchange reported a significant increase in profit despite mixed provisions for bad loans.
Significant Increase in Revenue Spike Cement Manufacturing Companies Profit in Q1 2022
A total of three cement producers made a combined profit of N156.56 billion in the first quarter (Q1) of 2022, representing an increase of 29 from N121.2billion reported in the first quarter of 2021.
Despite reporting a hike in the cost of sales and operating expenses, the growth in profit by Nigeria’s cement makers, Dangote Cement, Lafarge Africa Plc, and BUA Cement Plc was boosted by the increase in revenue.
An investigation by THISDAY revealed that the retail cement prices in Nigeria reportedly rose from around N2,400-N2,600 per 50kg bag in 2020 to an average price of N4,000 at the end of March 31, 2022.
Meanwhile, Dangote Cement reported an 18 per cent increase in its profit to N105.85 billion in Q1 2022 from N89.7billion in Q1 2021.
The cement giant generated N413.18billion from revenue in Q1 2022, representing an increase of 24.2 per cent from N332.65billion in Q1 2021.
The chief executive officer of Dangote Cement, Michael Pucheros in a statement had said: “Our group volumes were down 3.6per cent mainly due to energy supply challenges in Nigeria. Our operations relying on cement and clinker imports – namely Ghana, Sierra-Leone, Cameroon – were impacted by the global supply chain challenges.”
However, BUA Cement saw a 22.4 per cent increase in profit to N33.14billion in Q1. 2022 from N22.4billion in Q1 2021 as its revenue closed Q1, 2022 at N96.99billion compared to N58.5 billion reported in Q1 2021.
In addition, Lafarge Africa reported a 92.18per cent increase in profit to N17.6billion in Q1 2022 from N9.14billion in Q1 2021, while its revenue rose by 27 per cent to N90.61billion in Q1 2022 from N71.47billion reported in Q1 2021.
On the backdrop of cement manufacturing companies reporting growth in revenue and profit, the only listed Nigerian construction company, Julius Berger Plc also benefited when its profit rose by 31.80 per cent to N3.73billion in Q1 2022 from N2.83billion in Q1 2021.
Capital market analyst, Mr. Rotimi Fakeyejo said: “The strong growth across the listed cement manufacturing companies as a result of price increment in the product. The cement manufacturing companies have been compelled to increase the price to preserve margins from the impact of foreign exchange devaluation.”
He explained further: “For 2022, we are likely to see increased sensitivity from the private sector and also taking into account that this is a pre-election year. In pre-election years, you tend to see more cautious activities in the real estate sector because of uncertainties in the world economy.
“For public sector demand as well, we don’t expect any significant effect in that space as we see preparation for the coming elections distracting policymakers from implementing the capital expenditure in the budget for 2022.”
Union Bank, GTCO, Fidelity Report Decline in Profit as 12 Banks’ Profits Hit N281.56bn
Of all the 12 banks, Union Bank of Nigeria Plc, Guaranty Trust Holdings Plc (GTCO), and Fidelity Bank Plc reported a decline in profit.
The breakdown showed that Union Bank of Nigeria reported an 11 per cent drop in profit to N5.55billion in Q1, 2022 from N6.21billion in Q1, 2021, while GTCO’s profit declined by 5.1 per cent to N43.2billion in Q1, 2022 from N45.55billion in Q1, 2021.
The Chief executive officer, of the Union Bank of Nigeria, Mr. Emeka Okonkwo in a statement said the bank 2022 renewed its focus on turbocharging productivity and ensuring full leverage of the strength of its digital channels, regional network, and talent to maximise the bottom line.
Fidelity Bank shows its profit closing Q1, 2022 at N9.52 billion, representing a decline of 0.78 per cent from N9.59 billion reported in Q1, 2021.
On the reverse, Access Holdings Plc reported a 9.2 per cent increase in profit to N57.4billion in Q1, 2022 from N52.55billion in Q1, 2021, while UBA grew profit by 8.7 per cent to N41.5billion in Q1, 2022 from N38.16billion in Q1, 2021.
For Ecobank Transnational Incorporated (ETI), its profit grew significantly by 25.7 per cent to N38.3billion in Q1, 2022 from N30.49billion in Q1, 2021.
The Chief Executive Officer of Ecobank Group, Ade Ayeyemi stated that the performance was achieved in a difficult operating environment characterised by the strengthening of the US dollar against local operating currencies, high inflation, high-interest rates, and tight labour markets across Africa as the Russia-Ukraine conflict continued to take its toll.
“Despite these challenges, we continued to support our customers effectively, which paid off as our businesses grew their revenues and profits. These were driven by trade, cash management, FICC, and payments, while we also achieved modest loan growth with support from higher interest rates.”
During the period under review, Wema Bank grew its profit by 119 per cent to N2.85billion in Q1, 2022 from N1.3billion in Q1 2021 as Stanbic IBTC Holdings reported N15.06billion profit in Q1, 2022 from N11.26billion in Q1, 2021.
Analysis of other banks’ results showed that FCMB group generated N5.17billion profit in Q1, 2022, an increase of 44.6 per cent from N3.57 billion in Q1 2022; Sterling Bank reported N3.75billion profit in Q1, 2022 from N2.51billion in Q1, 2021 and Jaiz Bank reported 25 per cent increase in profit to N1.04billion in Q1, 2022 from N832 million reported in Q1, 2021.
Despite posting modest performance, some listed banks have struggled to grow their stock price.
Analysts at Coronation Research stated that 2022 has been a challenging year thus far for Nigerian banks’ stocks.
Coronation Research in a report titled “Nigerian Banks: Q1 22 earnings review” said, “Year-to-date, the sector index has returned a disappointing 7.4per cent and has grossly underperformed the broader equity gauge (NGX-ASI: +24.3per cent).
“Notably, it is the second-worst performing sector index. Stock performance within our coverage universe tells a similar story: FBN Holdings (+4.8per cent) and Access Holdings (+3.8 per cent) have recorded small gains, UBA has been flattish, while GTCO (-8.1 per cent), Stanbic IBTC Holdings (-8.3 per cent), Zenith Bank (-2.6 per cent) have fallen.”
Commenting on the unaudited result and accounts by listed banks, the Managing Director, ARM Securities Limited, Mr. Rotimi Olubi said: “Interest income has been a major driver of earnings across all banks. We have seen a significant increase in banks’ interest income due to a rise in loans from customers and institutions.”
Other companies with growth in profit
With the hike in global oil prices, listed petroleum marketing companies have also reported growth in profit. For instance, Totalenergies Marketing Nigeria reported a 46.97 per cent increase in profit to N4.37billion in Q1, 2022 from N2.97billion in Q1, 2021.
Seplat Petroleum thus reported a 12.27 per cent decline in profit to N8.29billion in Q1, 2022 from N9.44billion reported in Q1, 2021.
The only considered brewery company, Nigerian Breweries Plc reported N13.6billion profit in Q1, 2022, an increase of 77.7 per cent from N7.66billion in Q1, 2021.
BUA Foods, Nestle Nigeria, Dangote Sugar, and Cadbury Nigeria, all FCMG reported growth in profit on the backdrop of an increase in revenue and a hike in operating expenses.
BUA Foods in the period reported an 18.61 per cent increase in profit to N22.84billion in Q1 2022 from N19.26billion in Q1 2021.
As Nestle Nigeria reported a 45 per cent increase in profit to N17.98billion in Q1 2022 from N12.4billion in Q1 2021, Dangote Sugar grew profit to N8.87billion in Q1 2022 from N8.3billion in Q1 2021.
In addition, Cadbury Nigeria announced N1.54billion profit in Q1 2022 from N241million in Q1 2021.
The Managing Director, Cadbury Nigeria, Mrs. Oyeyimika Adeboye in a statement had said the company’s current repositioning strategy is beginning to yield the desired results.
