Nigerian companies appeared to have braced the disruptions caused by the outbreak of coronavirus in the latter part of first quarter to record steady growth within the three-month period but concerns remain over the impact of the extended lockdown due to the pandemic on corporate earnings over the next quarters.
First quarter reports from Nigeria’s largest banks, food companies, brewers and manufacturers at the weekend showed relatively steady performance with most companies overriding marginal decline in sales with internal cost control and operating efficiency to boost the bottom-line.
Early filings on corporate earnings for the first quarter ended March 31, 2020 showed that the influential banking sector remained on a steady positive outlook with increasing online transactions moderating decline in other incomes. Several other companies showed comparatively steady performance, although the manufacturing sector continued to struggle with combined negative impact of poor logistics, energy and taxes.
The early filers included Nigeria’s largest bank, Guaranty Trust Bank (GTB), oldest surviving banking group, FBN Holdings Plc; retail banking leader, Access Bank Plc; pan-African banking groups, United Bank for Africa (UBA) and Ecobank Transnational Incorporated. Non-banking filers included Cadbury Nigeria, Nigerian Breweries, Unilever Nigeria and United Capital Plc.
Nigeria recorded its first coronavirus outbreak in late February 2020 and it has since been grappling with almost daily increase in confirmed cases. The growing number of cases and spread had seen introduction of many containment measures including restriction of public gatherings and lockdown of the major economic and political centres of Lagos and Federal Capital Territory (FCT), Abuja as well as several other sub-national restrictions. Most companies scaled back operations and shifted to online business continuity plans.
Managing Director, Trust Yields Securities, Alhaji Rasheed Yussuf, said the general performance of the companies in first quarter appears “very good” noting that the effects of COVID-19 appeared not to have highly manifested on the operations of companies during the quarter.
He however said the second quarter may see the full effect of the COVID-19 disruptions as Nigeria struggles to cope with external pressure from crude oil price crash.
“The second quarter will be a product of COVID-19. Performance of companies is expected to be grossly affected. But it is a matter of conjecture at the moment because some developments may moderate the negative impact of COVID-19. For instance, it depends on whether the government will reverse lockdown in which economic activities can begin to pick before the end of the quarter,” Yussuf, a senior stockbroker said.
He noted that performance of the companies in the second quarter will ultimately be a matter of degree of responses to the current challenges pointing out that the free fall in the oil sector may also slow down if Nigeria’s major buyers, including United States and China resolve their current challenges.
Chief Dealer, Globalview Capital Limited, Mr. Aruna Kebira, said the first quarter results surpassed expectations as several analysts had expected the disruptions in March to moderate performance for the period.
“The first quarter results actually appeared as a surprise to analysts, the market did not expect the kind of results we are seeing. But I think that second quarter may suffer some setbacks because production and productivity have stopped as from the month of April, without the knowledge of when the lockdown will be lifted. If 33 per cent of the time in second quarter have been lost, possible recovery may be difficult. There will be no way that second quarter will not be affected,” Kebira said.
He noted that prevailing uncertainties have made corporate planning difficult citing the uncertainty around lifting or extension of the lockdown.
According to him, the COVID-19 impact on the second quarter may be more pronounced if the lockdown is extended to cover the month of May, which translates to loss of some 67 per cent of the productive time.
GTB sustained modest growths across key performance indices in first quarter with pre-tax profit rising to N58.2 billion in first quarter 2020 as against N56.98 billion in first quarter 2019. After taxes, net profit also improved from N49.30 billion in first quarter 2019 to N50.07 billion in first quarter 2020. Earnings per shares increased from N1.74 in first quarter 2019 to N1.77 in first quarter 2020. Net interest income had risen from N58.22 billion to N64.28 billion, counterbalancing the decline in net fee and commission incomes, which dropped from N18.01 billion to N13.55 billion.
Also, UBA grew its top-line by 11.8 per cent to N147.2 billion in first quarter 2020 as the bank leveraged on modest growth in both interest and non-interest income as well as increased efficiency to expand bottom-line by deliver 8.5 per cent in first quarter 2020. Profit before tax rose to N32.7 billion in first quarter 2020 compared with N30.2 billion recorded in first quarter of 2019. It also sustained its strong profitability recording an annualized 20 per cent Return on Average Equity (RoAE). Gross earnings rose by 11.8 per cent to N147.2 billion in first quarter 2020 compared with N131.7 billion recorded in comparable period of 2019.
Cadbury Nigeria’s net profit rose by 26 per cent to N638.94 million in first quarter 2020 as against N506.75 million recorded in comparable period of 2019. Earnings per share thus increased by 26 per cent from 26.98 kobo in first quarter 2019 to 34.02 kobo in first quarter 2020. Profit before tax had risen by 26 per cent from N723.93 million to N912.77 million. Turnover however declined by eight per cent from N9.28 billion in first quarter 2019 to N8.55 billion in first quarter of 2020.
United Capital, an investment banking group, also showed a strong start with double-digit growths in all key performance indices. Gross earnings rose by 32 per cent while pre and post tax profits grew by 53 per cent and 54 per cent respectively. Gross earnings rose to N1.92 billion in first quarter 2020 compared with N1.45 billion in first quarter 2019. Operating income rose by 40 per cent from N1.35 billion in 2019 to N1.89 billion in 2020. Profit before tax increased from N766.87 million in first quarter 2019 to N1.18 billion in first quarter 2020. After taxes, net profit rose from N644.17 million in first quarter 2019 to N991.29 million in first quarter 2020. Earnings per share for the three-month period thus increased from 11 kobo in 2019 to 17 kobo in 2020.
Source:
Taofik Salako