The macro environment and weak consumer spend, resulting from non-payment of salaries of most government workers are reflecting on companies half-year (H1) results, some of which are released at the Nigerian Stock Exchange (NSE).
Currently, the expectations of Nigerians are high for improved economic and social well-being but the current economic reality seems to negate these hopes, analysts say.
“The consumer purchasing power in Nigeria is weak, therefore the manufacturers of products are unable to pass on their costs directly to the consumers”, says Paul Gbededo, group managing director, Flour Mills of Nigeria plc.
Gbededo, who is the president of the Association of Food, Beverage and Tobacco Employers (AFBTE) says that as production shrinks side by side the sales figures, company operations will likewise shrink, with attendant rationalisation of expenses and reduction in the number of people employed.
Cadbury Nigeria plc reported a 7.72 percent decline in revenue, as indicated in its unaudited second-quarter (Q2) results for the period ended June 30, 2015.
Its Q2 revenue dipped to N14.137bn from a high of N15.321bn in H1’14. The beverage company reported a Loss Before Tax (LAT) of N250.72million in H1’15, from a Profit Before Tax (PBT) of N1.792billion in H1’14, a decline of 113.99 percent.
Cadbury’s Loss After Tax (LAT) of N250.72million in H1’15 from N1.263billion Profit After Tax in H1’14, is a huge decline of 119.84 percent when compared with the corresponding period of 2014.
Also recently, Stanbic IBTC Holdings plc released its half-year results with a proposal to pay interim dividend of 90kobo; though the consolidated statement of comprehensive income for the half year period to June 30, 2015 shows that Stanbic IBTC Holdings plc reported profit before tax (PBT) decline of 52 percent to N9.537billion from N19.946billion in the corresponding period of 2014.
Profit for the period declined by 40 percent to N9.695billion from N16.184billion. Its basis earnings per share – continuing operations declined by 46 percent from 148kobo in H1’14 to 80kobo in H1’15. Gross earnings increased by 11 percent to N68.295billion from N61.715billion in the corresponding period of 2014.
“Despite the strong sales growth, unit volumes were still constrained by the tough macro environment and weak consumer discretionary spend.
“As reflected in Stanbic IBTC Holdings’ Q2 2015 results, we believe the shrinking share of household wallets is partly responsible for what we are seeing in NB’s results, aptly depicted by the non-payment of salaries of government workers which weighed on the bank’s results” said analysts at Lagos-based investment house, FBN Capital, in a recent reaction to Nigerian Breweries plc results.
“Given the dwindling revenue accretion to the government, as well as challenges arising from the sustained impact of currency devaluation on the economy, we foresee strains to both government and consumer expenditure, while noting that rising costs in the economy which have affected headline inflation upwards in the year would likely persist”, analyst at Meristem Securities said recently.
The unaudited financial statements of Nigerian Breweries plc for the six months period ended June 30, 2015 shows its revenue stood at N151.7 billion, an increase of 7.2% against N141.5 billion revenue in the same half-year (H1) period of last year. The H1’15 results of Nigerian Breweries plc shows that its Profit Before Tax (PBT) declined by 8.53% to N30.989billion from a high of N33.882billion in the corresponding period of last year.
The company’s Profit After Tax (PAT) in H1’15 dipped by 10.02% to N21.477billion, from N23.871billion in H1’14. Basic Earnings per Share (EPS) declined by 14.18% to 271kobo from 316kobo in H1’14.
Transnational Corporation of Nigeria plc statement of comprehensive income for the second quarter (Q2) ended June 30, 2015 shows that group revenue declined to N20.253billion from H1’14 level of N21.212billion.
Profit before taxation (PBT) dropped to N5.163billion from N8.015billion. The group profit for the half-year stood lower, at N4.284billion, from an H1’14 level of N6.887. Basic Earnings Per Share (EPS) dipped to N6.13kobo from N11.30kobo in H1’14.
Over 18 states owed workers salaries for periods ranging between three and ten months, a development which analysts believe shrank the share of household wallets –with negative impact on their spending and savings styles.
FBN Capital analysts say that for the second successive quarter, Stanbic IBTC Holdings’ (Stanbic) earnings surprised negatively, and loan loss provisions contributed meaningfully to the surprise.
“We believe that the worsening macro environment is likely to lead to a deterioration in asset quality, offsetting potential recoveries, particularly in sectors/segments outside oil and gas and power,” the analysts said.
Secure Electronic Technology plc which holds the license to operate the national lottery in Nigeria, reported decline in H1’15 gross income at N3.6billion against N7.2billion in H1’14. Its profit before tax declined from N43.4million to N29.6million; while profit after tax dropped from N75million to N29.6million.
Iheanyi Nwachukwu
