Transnational Corporation of Nigeria (Transcorp) Plc, the country’s conglomerate, has navigated the storm of an economic recession from which the nation is emerging as it returned to the path of profitability.
The leading diversified conglomerate with interest in Agriculture, Oil and Gas, Power and Hospitality felt the pinch of a sudden drop in oil price, severe dollar shortages and the devaluation of the naira in 2016.
The firm also grappled with dearth of gas, which was caused by incessant attacks on oil facilities by the Niger Delta militant group as the firm suspended plans to build one of the nation’s power plants.
The year 2016 was horrendous for Transcorp and other companies operating in the country.
Improvement in gas supply underpins 2017 financial performance
An improvement in crude oil price to $60 from record low, relative peace in the Niger Delta region that underpinned gas supply, and increased dollar supply help Transcorp revert to the path of profitability in 2017
The country’s gross domestic product expanded for three consecutive quarters last year after 1.60 percent contraction in 2016, with year on year growth of 1.90 percent in the last quarter of 2017.
The gradual economic recovery showed face in the numbers of Transcorp as it posted a profit after tax of N10.67 billion in December 2017, from a loss position of N1.12 billion recorded in 2016, a period of economic lethargy.
A significant reduction in foreign exchange loss on financing activities and improved gas supply are the major drivers of profit margins and revenues.
Sales spiked by 35.10 percent to N80.28 billion in December 2017 from N59.42 billion as at December 2016; driven by a 50.84 percent increase in energy sent out to N42.90 billion in the period under review.
Energy sent out make up 53.44 percent of total revenue as the conglomerate’s meticulously orchestrated plant maintenance programe resulted in increased capacity.
Transcorp’s exposure to the vagaries of exchange rate movement waned as foreign exchange loss on borrowing dipped by 75.66 percent to N4.55 billion in the period under review from N18.70 billion the previous year.
The devaluation of the naira in mid-2016 by the central bank balloon the dollar denominated debt in the books of firms.
Transcorp has a time interest coverage of 1.89, which means its ability to meet interest expense, is not in doubt. Finance costs fell by 48.84 percent to N13.34 billion in the period under review from N26.64 billion the previous year.
The profit reported in the year was largely as a result of increase in power generation by Transcorp Power Ltd resulting from improved gas supply and increased generation capacity. Available capacity increased from 505MW to 701MW during the year, according to Adim Jibunoh, President/CEO of Transcorp.
“Capacity increase was achieved through carefully planned maintenance program for our power generation assets and tactical engagement with stakeholders. Also, our hospitality business remains resilient, posting stronger year-on-year performance,” said Jibunoh.
Transcorp is able to manage direct costs attributable to projects as gross profit spiked by 20.75 percent to N36.42 billion in December 2017 as against N30.16 billion as at December 2016.
Earnings before interest and tax (EBIT) otherwise known as operating profit increased by 20.43 percent to N26.03 billion in the period under review as 20.71 billion as at December 2016.
Return on equity (ROE) increased to 11.07 percent in December 2017, from a negative figure of 1.29 percent the previous year. In other words, the Nigerian conglomerate has utilized the resources of shareholders in generating higher profit.
Transcorp has declared a final dividend of N0.02 on every 0.5 shares held, which translates into a absolute figure of N813 million.
Incorporated on November 16, 2004 and quoted on the Nigerian Stock Exchange, Transcorp has a shareholder base of about 300,000 investors, the largest of which is Heirs Holdings Limited, a pan-African proprietary investment company.
The company’s share price closed at N1.85 as of close of trading at Friday, valuing it at N75.18 billion.
BALA AUGIE
