7 August 2017

Nigeria: H1'17 - Companies' Revenue Rises 20 Percent to N2.6 Trillion

A sustained recovery in the economy has translated into bumper growth in corporate performance with the first half, 2017 (H1'17) financial report statements of leading companies quoted on the Nigerian Stock Exchange, NSE, showing significant rise in revenue and quantum leap in profits.

About 81 companies that have so far turned in their financial reports to the Exchange recorded cumulative turnover of N2.59 trillion, a 20 per cent increase compared to N2.16 trillion reported in H1'16. The figure out-performed average inflation rate of 17.4 per cent during the period.

But the profit before tax, PBT, of the companies witnessed astronomical growth within the six-month period, rising by 81.4 per cent to N572.83 billion against N315.8 billion recorded in H1'16, a huge head room above inflation rate.

The financial position of the companies confirmed the consensus position from various quarters that Nigeria economy would exit recession in the second quarter of 2017 (Q2'17). The figures for Q2'17 Gross Domestic Product, GDP, is being compiled for a release later this month but Q1'17 at -052 though still showing the economy is still in recession, it however, indicated a reversal of the downward trend started in the corresponding period of 2016.

The Nigeria Economic Summit Group, NESG, arguing that recession would end in Q2'17 said that stability in oil price, and Presidency's dialogue with the Niger Delta militants, which has reduced disruption of oil production, signified huge boost to the economy and supported its projected exit from the economic strife.

The NESG Chairman, Kyari Bukar, had noted that the two factors have increased the hope for brighter prospects, coupled with the intervention by the Central Bank of Nigeria on foreign exchange market.

"Since we didn't get out of recession by Q1, we will get out by Q2. But the concern for us as a nation is that growth must be at a higher percentage rate for it to translate into jobs, well-being of average citizens among others."

The Minister of Finance, Mrs Kemi Adeosun, and the Central Bank of Nigeria, CBN, Governor, Mr. Godwin Emefiele, have also said on several occasions that Nigeria was on its way out of recession.

To actualise the projected recovery, the federal government had put in place some measures which, according to economic watchers, are quickly translating to improved business outlook for manufacturing and non-manufacturing companies.

Within the period, the federal government came out with an economic road map, the Economic Recovery and Growth Plan, ERGP, which boosted confidence in the economy. But analysts point to the CBN's new foreign exchange (forex) market, especially with the introduction of Investors & Exporters (I&E) forex window as the greatest boost to corporate performance and the economy through its significantly improved liquidity in the forex market.

Some macro-economic indicators are also signalling recovery in the economy. The CBN's Purchasing Managers Index (PMI) survey for the month of July rose to 54.1 points, growing for the 4th consecutive month to 54.1points.

Similarly, non-manufacturing PMI improved for the 3rd consecutive month, rising to 54.4 points (+1.1%) to 54 points.

Also, the inflation numbers have been on the downward trend since February trending from 18.72 per cent in January to 16.10 per cent at the end of June.

Corporate Results

Breakdown of the corporate results showed that pharmaceutical sector, which has been enjoying huge investors' patronage on the stock exchange, came tops in term of percentage growth in revenue. The sector recorded 77 per cent rise to N11.84 billion from N6.69 billion in H1'16.

This was followed by the consumer goods sector, which rose by 64.2 per cent to N364.82 billion from N222.21, while the agriculture sector came third with 58.6 per cent increase to N31.14 billion from N19.64 billion 2016.

The oil and gas sector led revenue in absolute terms, as the sector's earning rose to N656.513 billion in H1'17 from N493 billion, representing 33.1 per cent growth. The sector accounted for 25.3 per cent of the total turnover for the period.

The banking sector trailed behind, pooling N653.5 billion against N604.02 billion recorded by the six banks that have so far released their results. However, the banking sector is projected to out-perform all other sectors when results of Tier-1 banks are released later this month. The Tier-1 banks that are yet to announce their results include Guaranty Trust Bank, Access Bank, Zenith Bank and United Bank for Africa (UBA). Only First Bank amongst the Tier-1 banks has announced H1'17 results. Yet the Tier-2 banks results accounted for 24.5 per cent of the total turnover during the period.

The industrial goods sector placed third, posting N402.36 billion in revenue compared to N413.64 billion in the corresponding period in 2016, thereby accounting for 15.5 per cent of the total turnover.

Profits soared

The oil and gas sector showed significant rebound in profitability with huge 990.5 per cent growth from a -N56.88 billion negative position to N6.39 billion. This jump in profitability followed reduction in the level of losses recorded by most of the companies in the sector compared to the corresponding period in 2016. The consumer goods sector, which recorded minimal profit in 2016 due mainly to rising cost of raw material sourcing and high cost of other manufacturing inputs occasioned by forex scarcity during the period, came second in terms of percentage growth. The sector achieved huge 352.9 per cent growth to N63.875 billion in H1'17 against N14.105 billion in H1'16, while the conglomerates sector, which also ended H1'16 in negative profit figures, came third with 246.9 per cent growth. The sector's PBT went up to N5.29 billion against -N7.77 billion loss before tax in 2016. The three sectors significantly out-performed inflation during the period.

The industrial goods sector led the profitability in absolute terms, pooling N281.67 billion compared to N122.57 billion in H1'16. This represents 49.2 per cent of the total pre-tax profit of all the companies put together. The banking sector came second with N66.32 billion PBT compared to N88.6 billion in H1'16 chiefly because the Tier-1 banks have opted to audit their account before publishing at the end of August. Nevertheless, the sector accounted for 11.6 per cent of the total profit recorded during the period. The consumer goods sector ranked third, recording N63.88 billion in PBT and accounted for 11.2 per cent of the total profit for the period.

Sectoral analysis

The oil and gas sector, driven by improvement in earnings position of counters like Oando Plc, Boc Gases, Total Nigeria Plc, MRS Oil and Mobil Oil, recorded 33.1 per cent revenue growth to N656.51 billion against N493.34 billion in 2016. This shows 25. 3 per cent of the total companies' turnover.

The the sector recorded N6.387 billion pre-tax profit against N56.882 billion loss before tax in H1'16, representing 990.5 per cent growth. This represents 0.2 per cent of the total pre-tax profit for the period.

Oando Plc led other companies analysed in the sector, rising by 129.8 per cent to close the period at N266.98 billion in comparison to N116.24 billion in the corresponding period. The company, accounted for 40 per cent of the sector's total turnover. BOC Gases followed by 77 per cent growth from N926.61 million achieved in H1'16 to N1.21 billion. The company, however, accounted for mere 0.2 per cent the sector's turnover volume. MRS Oil Plc placed third, rising by 16.2 per cent to N62.48 billion from N53.78 billion and accounted for 9.5 per cent of the sector's turnover volume.

BOC Gases, towered above other in terms of profitability. The company's pre-tax profit rose by 496 to N199.40 million from N33.45 million in H1'16. It was followed by Caverton Offshore Group Plc 140 percentage growth to N938.03 million from N2.40 million loss position, while Forte Oil Plc placed third with 26.1 per cent from N4.26 billion PBT recorded in H1' 2016 to N4.74 billion.

Banking sector

The banking sector on account of decision by its sector leaders to audit their accounts before publishing, recorded N653.5 billion in revenue and N66.32 billion in pre-tax profit profit. The six banks that made up the

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