Q3’18: 113 listed coys record mixed results as turnover hits N7.350trn
Profits grew marginally by 1.3% to N1.124trn Banking sector outperforms other sectors in absolute terms Petroleum sector lead profit in percentage term By Peter Egwuatu & Nkiruka Nnorom
THE hostile operating environment in the country occasioned by the political tension and uncertainty took a toll on the listed companies in the Nigerian Stock Exchange, NSE, which recorded mixed results in the third quarter, 2018, Q3’18 as their overall performance showed marginal growth in both turnover and profit.
Financial sabigist inquest into the reports turned in to the NSE for Q3’18, indicates general low and mixed performance in turnover and PBT with companies drawn from various sectors of the Exchange posting combined turnover of N7.350 trillion, representing an increase of 9.8 percent from N6.696 trillion in Q3’17. The companies, numbering 113, accounting for the largest capitalization in the stock exchange, also recorded combined PBT of N1.124 trillion, representing a mere increase of 1.3 percent over N1.109 trillion in Q3’17.
Nigerian Stock Exchange Stakeholders and analysts have attributed the low performance of companies to the lull in economy following the political tension and uncertainty, drift by foreign investors, policy inconsistencies and insecurity in some part of the country. The results which came in mixed with some positive surprises as the Oil and Gas sector led in profitability in percentage term rising by over 230 percent to N95.872 billion, from N28.985 trillion while the banking sector outshined other sectors in absolute figures in both turnover and profitability to record N3.232 trillion and N749 billion respectively in Q3’18. The results further showed that companies’ performance underperformed the inflation rate which stood at 11.28 percent in September this year. It will be recalled that the consumer price index, (CPI) report in September 2018 increased by 11.28 percent which was 0.05 points higher than the rate recorded in August 2018 (11.23) percent. The September 2018 inflation figure showed a second consecutive increase in the inflation rate, first, in August it was 11.23 percent, and September 11.28 percent. Many analysts have projected a rise for the third consecutive month in October, driven by continued increase in food prices, occasioned by herdsmen attack on farmers and recent episodes of flooding which undermine food supply across the country. Sectoral turnover analysis The banking sector, which has 14 banks under our study topped activities in turnover in absolute terms, recording N3.232 trillion in Q3’18. It accounted for about 44 percent of the combined sectors’ turnover. The Oil and Gas sector followed recording N1.283 trillion and accounted for about 17.7 percent of the combined sectors’ turnover. Consumer goods sector came third in the chart recording N1.048 trillion, followed by Industrial Goods recording N976.8 billion while conglomerates sector took the fifth position posting a total of N262 billion. In percentage term, the Oil and Gas sector led the chart rising by 27.3 percent to N1.283 trillion in Q3’18 from N1.008 trillion in Q3’17. Courier/Freight/Delivery sector trailed behind, up by 25.5 percent to record N9.118 billion from N7.265 billion in Q3’17. Services sector showed surprises as it came third rising by 24.2 percent to N31.117 billion from N25.062 billion, while hospitality also improved to come fourth as it rose by 16.8 percent to N24.041 billion from N20.580 billion. The insurance sector came fifth position rising by 16.3 percent to N174.4 billion from N149.7 billion. Sectoral PBT analysis The banking sector also dominated other sectors in profitability in absolute term. It recorded N749.4 billion to top the chart, followed by Industrial Goods sector which posted N107.4 billion. Oil and Gas occupied the third position recording N95.9 billion; consumer goods posted N92.5 billion while conglomerates sector occupied the fifth position posting N22.410 billion. In percentage terms, Oil and Gas sector led the chart rising by 230 percent to N95.872 billion from N28.985 billion. It was followed by Courier Courier/Freight/Delivery sector , which has three companies under our study went up by 81.0 percent to N945 million from N522 million. Pharmaceutical sector, which has eight companies under our study, also recorded surprises occupying the third position as it surged by 76.3 percent to N2.322 billion from N1.317 billion. The hospitality sector occupied fourth position rising by 42.7 percent to N3.660 billion from N2.565 billion, while banking sector occupied the fifth position as it went uy by 11.8 percent to N748 billion from N6702 billion in Q3’17. Banking sector In the banking sector Ecobank topped the sector in Q3’18 in absolute value as it recorded N572.658 billion turnover, followed by Zenith Bank which posted N474.607 billion, Access Bank N375.200 billion, GTBank N337.300 billion and UBA N268.937 billion. In percentage term, Sterling Bank led the chart rising by 21.1 percent to N114.610 billion, followed by UBA which went up by 13 percent to N268.9 billion from N238.1 billion in Q3’17. Union Bank occupied the third position rising by 11.6 percent to N122.2 billion from N109 billion. It was flowed by JAIZ Bank which went up by 10.9 percent to N5.504 billion from N4.965 billion, while Stabic IBTC occupied fifth position rising by 9.5 percent to record N168.8 billion from N154.2V billion in Q3’17. On profitability basis, Zenith Bank led in absolute terms, recording N167.3 billion, followed by GTBank which posted N164.2 billion. Ecobank occupied third position recording N96.3 billion PBT. UBA occupied fourth position recording N79.11 billion, while Stanbic came fifth recording N70.380 billion. In percentage term, Wema Bank led the PBT chart as it surged by 69.9 percent to N3.057 billion from N1.799 billion in Q3’17. It was trailed by Stanbic IBTC which went up by 54.2 percent to N70.380 billion from N45.910 billion in Q3’17. Ecobank occupied third position climbing by 38.8 percent to N96.321billion from N69.407 billion. Sterling Bank came fourth on chart as it went up by 29.5 percent to N8.502 billion from N6.563 billion and Fidelity Bank came third rising by 23.6 percent to N20.064 billion from N126.236 billion. Oil and Gas sector Companies in the oil and gas sector recorded an outstanding performance with both revenue and pre-tax profit witnessing appreciable increase within the period. Breakdown showed a huge improvement in the pre-tax profit position of the companies as some of the companies (Forte Oil Plc and Seplat Petroleum Development Company Plc) that ended Q3’17 in loss rebounded to profitability. Specifically, the companies, which include Forte Oil Plc, Global Spectrum Energy Services Plc, Oando Plc, MRS Oil Nigeria Plc, Seplat Petroleum Development Company Plc, 11 Plc, Rak Unity Petroleum Plc, BOC Gas Plc and Conoil Plc recorded 27.28 percent increase in revenue to N1.283 trillion from N1.008 trillion in Q3’17. Their PBT soared by 230.76 percent to N95.872 billion from N28.985 billion in the previous year. Oando Plc led others in nominal value in turnover position as it posted N505.1 billion during the period. This was followed by Total Nigeria Plc, which grossed N226.915 billion and Seplat Plc with N173.710 billion in revenue. 11 Plc (formerly |Mobil Oil Nigeria Plc) came fourth with N125.042 billion turnover, while Forte Oil Plc placed fifth with N94.813 billion turnover. However, Seplat dwarfed others in terms of percentage growth in revenue, recording 103.9 percent growth to N173.710 billion from N85.190 billion. 11 Plc ranked second with its revenue rising by 41.7 percent to N125.042 billion from N88.246 billion, followed by Forte Oil Plc with 39.37 percent growth to N94.813 billion from N68.031 billion, while Global Spectrum Energy services placed fourth with 37.5 percent revenue growth to N1.291 billion from N938.62 million in the corresponding period in 2017. Meanwhile, Seplat led others in nominal terms, recording N65.053 billion pre-tax profit, followed by 11 Plc with N11.646 billion. Total Nigeria Plc ranked third with N11.44 billion PBT, while Oando Plc and Conoil Plc posted N4.77 billion and N2.268 billion PBT respectively. However, Seplat which rebounded from a loss position in 2017 led in percentage terms in the pre-tax profit, recording N8.659 percent increase. Rak Unity Petroleum trailed far behind with 206.1 percent increase; Forte Oil, which also rebounded from a loss position, recorded 179.2 percent PBT increase to close as the third on the list, while 11 Plc came fourth with 70.59 percent PBT growth. Stakeholders/analysts reactions: Analysts at Cordros Capital, a Lagos-based investment banking firm, in their reaction said that results announced by the companies were largely mixed. According to them, performance in the banking sector was mixed, with Zenith Bank, Guaranty Trust Bank and Access Bank posting positive year-on-year (y/y) growth in Q3’18, while United Bank for Africa and FBN Holdings Plc recorded declines. Among the industrials, Dangote Cement Plc was impressive, leading to a boost in investor interest in the stock. Earnings performance in the consumer goods segment was also mixed, while earnings were broadly positive in the oil and gas sector, they said. The Head of Research & Investment, FSL Securities Limited, Mr. Victor Chiazor, said: “ We observed that the nine months 2018 results for companies came in mixed with a few negative surprises especially in the consumer goods space were most players reported significant decline in bottom line performance. However, we are impressed with major players in the banking sector given their ability to maintain decent profit levels despite the headwinds observed during the period. We expect the banking sector to lead the way into the full year earning but project that corporate action in terms of dividend declared by companies would be a major driver of share prices in the full year.”
Major driver of share prices The Executive Vice Chairman, High Cap Securities Limited, David Adonri said: “When compared to Q3’17 most companies declined in performance. The hostile operating environment adversely affected them. Year end may replicate Q3’18. As usual, the banking sector is likely to be dominant since the economy is still driven by short term macroeconomic policies.” The spokesperson for Independent Shareholders Association of Nigeria, ISAN, Mr Moses Igbrude said: “The third quarterly reports so far released by companies have mixed feeling; some performance improved while others did not as compared with last year. But considering the harsh operating environment one will give them a pass mark. “Furthermore, any election year in Nigeria has always had a negative impact on the economy and companies’ performance .It is a season where you witness more policies inconsistencies and where the environment is heated up with so many negativity. I am not expecting anything unusual. But my advice to companies is to be focused on cost management and be very cautious when making business decisions this time. The banks should focus on loans management so as to maintain low impairment rate through the year. On the expectation for the full year, the companies will perform averagely. Few companies will do better than last year while majority of the companies may not do well especially the insurance industry. My sincere hope is for the companies to do better than last year.”