Some of Nigerian big companies have lost money to currency volatility and the slump in the economy of Africa most populous as full year profit sagged.
Net profit of the 30 largest listed firms on the Nigerian Stock Exchange (NSE), or the NSE – 30 slumped by N24.81 billion last year to N717.27 billion from N742.09 billion in 2015, based on data gathered by BusinessDay.
Worst hit sector is the oil and gas, construction and consumer goods names and service sector.
Seplat Petroleum Development Co. Plc (Seplat), Oando Nigeria Plc, Julius Berger Nigeria Plc, Guinness Nigeria Plc, Seven up Bottling Company Plc, International Breweries Nigeria Plc and Transnational Corporation of Nigeria (Transcorp) recorded a combined loss of N187.98 billion.
Volatility in oil price impacted the balance sheet of oil companies globally. This is evident in the reduction in indigenous upstream oil and gas firms’ crude oil and natural gas sale for the year ended 2016.
“Most companies, particularly consumer ones, have found it very challenging,” Robert Omotunde, an analyst at Afrinvest West Africa Ltd., “We don’t think there’ll be much improvement this quarter. As long as the foreign-exchange market is inflexible, we won’t see a major earnings surprise on the upside.”
A sharp drop in price of oil by 50 percent and the plunge in naira damped consumer spending thus hindered companies from importing raw materials and equipments to meet production demands.
Some businesses were forced to book dollar based loan they had taken from parent companies after the devaluation of the naira by central bank.
Julius Berger and Transcorp were squeezed by the aforementioned exceptional losses as they recorded foreign exchange revaluation losses of N14.23 billion and N18.70 billion, respectively.
Nigeria’s economy contracted by 0.52 percent in the first quarter of the year, lower than the 1.5 percent drop in the last quarter of 2016, the country’s worst recession in 25 years, according to the National Bureau of Statistics (NBS).
Inflation for the month of April stood at 17.20 percent, the highest in 11 years.
“Imported cost inflation will continue to pressure corporates’ margins as they struggle to fully pass on increases in input costs to customers.” said Moody’s Investors Service said in a recent report on Nigerian corporates.
While other sectors had a torrid environment undermine growth, operators in the downstream Agric sector thrived on the back of government policies.
OKomu Oil palm and Presco Oil Palm, the two largest oil palm and kernel oil producers in Africa’s most populous nation are in growth spurt as profit surged by 85 percent and 772 percent respectively, thanks to the ban on Palm Kernel Oil products by the central bank.
The ban forced local consumer goods firms or competitors to patronize the two oil palm giant.
Analysts are of the view that the rebound in oil price, the passage of the budget and the new foreign exchange window introduced by the central bank will ease the flow of liquidity in cash starved economy.
This means there is light at the end of the tunnel for Nigerian companies.
BALA AUGIE
