Seventy percent of the biggest companies that have released their financial results for the first quarter (Q1) of 2022 posted their highest Q1 profit after tax in 10 years in the period despite the economic headwinds facing them.
These companies include Unilever Nigeria Plc, BUA Cement Plc, Lafarge Africa Plc,
Ecobank Transnational Incorporated Plc, Stanbic IBTC, Guaranty Trust Holdings Company Plc (GTCO), United Bank for Africa Plc (UBA), FCMB Group, Nigerian Breweries Plc, and UPDC Plc.
BUA Cement recorded its highest Q1 profit in four years; Lafarge, Ecobank, UBA, FCMB, UPDC and Nigerian Breweries recorded their highest profit in the last 10 years, while GTCO saw a decrease in profit in this period.
The trend of large companies declaring bumper profit is, however, in sharp contrast with an economy struggling with weak consumer purchasing power and rising inflation.
According to Johnson Chukwu, CEO of Cowry Asset Management Ltd, the increase in profit is not necessarily as a result of increase in demand but an elevated price of goods and services that masks the devaluation of the local currency.
“The value of the local currency has depreciated over time; so many organisations have increased the price of their goods to cover for the depreciated naira value,” he said.
The 10 companies analysed saw their profit after tax rise by 24.6 percent to N263.23 billion in Q1 2022 from N211.33 billion in the comparable period of 2021.
“There would be an increase in demand and quantity of goods sold, due to the economy recovering from the COVID-19 depression; however looking at a time series assessment, there would have to be an adjustment for changes in value of local currency,” Chukwu said.
BusinessDay analysis shows that seven out of these companies also saw an increase in their share prices from the beginning of the year till date, while share prices of the remaining three companies fell.
“Investors have reacted to this profit growth by investing aggressively in the shares of these companies. This has supported the rally we have seen in stock prices,” Ayorinde Akinloye, investment research analyst at United Capital, said.
For the banking sector, Adesoji Solanke, director, frontier/SSA banks and fintech at Renaissance Capital, said, “Non-interest revenue growth trends remain positive while impairment charges are also still quite benign. On the other hand, cost pressure is one issue we’re seeing play out this year, driven by higher fuel costs, regulatory costs (AMCON and NDIC), marketing and staff expenses (full-time and contract).”
Chibundu Emeka-Onyenacho, analyst, equity research at Renaissance Capital, said the ability of the fast-moving consumer goods (FMCG) sector to stock up with raw materials was seen as one of the major reasons they were able to curb production cost.
He, however, said this could be temporary, as the impact would be felt when these companies restock their raw materials at current price.
Emeka-Onyenacho said: “Given the raw material inflation we saw in 2021, FMCG companies made the decision to buy more in anticipation that the international raw material price inflation would persist. This move helped their cost base given the current geo-political tension.
“We will most likely see the impact of the new elevated prices further into the year after they restock. Players such as Nigerian Breweries increased prices in February and the acceptance was higher supported by reduced competition in the lager space as Guinness is reducing its exposure to lager and focusing on stout and spirits) and the fact that beer in Nigeria is still cheap compared to other African countries.”
Unilever
Unilever, one of the major players in Nigeria’s FMCG space, saw its profit surge by 464.56 percent to N1.79 billion in Q1 of 2022 after recovering from a loss of N491 billion last year.
The profit was attributed to an increase in revenue by 24.5 percent to N20.6 billion in Q1 2022 from N16.51 billion in the same period last year.
Unilever’s share price increased by 0.75 percent from N13.40 at the start of the year to N13.5 on Thursday.
Earnings per share increased to N0.31 from a loss of N0.09.
BUA Cement
BUA Cement, one of the largest cement manufacturers in the country, recorded its highest profit in four years, according to the financial report available on the Nigerian Exchange Limited.
Its profit increased by 48.14 percent to N33.14 billion in Q1 2022 from N22.37 billion last year.
The company has since grown its profit by 111.35 percent from N15.68 billion in the comparable periods of 2019.
Its profit was boosted by an increase in sales by 58.51 percent to N96.99 billion in Q1 2022 from N61.19 billion in the same period last year.
BUA Cement’s share price increased by 2.39 percent from N67.05 at the start of the year to N68.65 on Thursday.
Earnings per share increased to N98 from a loss of N66.
Lafarge
Lafarge, one of the largest cement manufacturers in Nigeria, recorded its highest profit in the period under review in the past 10 years.
It recorded a surge in profit by 92.12 percent to N17.56 billion in Q1 2022 from N9.14 billion last year.
Lafarge has seen an increase in profit over the years by 189.13 percent from N6.07 billion in the comparable periods of 2013.
The increase in profit was attributed to revenue growth of 26.78 percent to N90.61 billion in Q1 2022 from N71.47 billion in the same period last year.
Its share price increased by 13.92 percent from N23.7 at the start of the year to N27 on Thursday.
Earnings per share increased to N109 from N57.
Ecobank
Ecobank also recorded its highest profit in the period under review in the past 10 years.
Its profit increased by 26 percent to N38.32 billion in Q1 2022 after recovering from N30.49 billion last year and an increase of 197.28 percent from N12.89 billion in 2013.
The pan-African lender’s profit was attributed to an increase in gross earnings by 15 percent to N245.41 billion in Q1 2022 from N214.28 billion in the same period last year.
Its share price increased by 41.32 percent from N8.35 to N11.8 on Thursday.
Read also: Nigeria’s biggest consumer goods firms walk tight rope on rising operation cost
Stanbic IBTC
Stanbic IBTC’s profit increased by 33.84 percent to N15.07 billion in Q1 2022 from N11.26 billion last year which was a decline from 2020 when N20.6 billion was recorded.
The profit was attributed to an increase in earnings by 47.69 percent to N67.23 billion in Q1 2022 from N45.52 billion in the same period last year.
Stanbic IBTC’s share price declined by 1.39 percent from N36 to N35.5 on Thursday.
Earnings per share increased to N111 from N82
GTCO
GTCO, one of Nigeria’s tier-1 banks, recorded a decline in profit by 5 percent to N43.21 billion in Q1 2022 from N45.55 billion recorded last year.
The decline in profit was despite the increase in interest income by 17.13 percent to N70.64 billion in Q1 2022 from N60.31 billion in the same period last year.
GTCO’s share price has declined by 7.88 percent from N25.9 to N23.95 on Thursday.
Earnings per share also declined increased to N1.51 from N1.6
UBA
UBA recorded its highest profit in the period under review in the past 10 years.
Its profit increased by 9 percent to N41.5 billion in Q1 2022 from N38.16 billion in the previous year, and it has grown its profit over the past 10 years by 166.7 percent from N15.56 billion.
The profit growth was attributed to an increase in interest income by 15 percent to N125.08 billion in Q1 2022 from N108.59 billion in the same period last year.
UBA’s share price increased by 2.5 percent to N8.24 on Thursday.
Earnings per share increased to N1.14 from N1.04
FCMB
FCMB recorded its highest profit in the period under review in the past 10 years.
Its profit increased by 44.61percent to N5.17 billion in Q1 2022 from N3.57 billion last year. The bank has been able to grow its profit by 23 percent from N4.2 billion in 2013.
The profit was attributed to an increase in revenue by 33.91 percent to N58.31 billion in Q1 2022 from N43.54 billion in the same period last year.
FCMB’s share price increased by 20.47 percent from N2.98 to N3.59 on Thursday.
Earnings per share increased to N0.26 from N0.18
UPDC
UPDC’s profit increased by percent to N120.8 million in Q1 2022 from a loss of N399.1 million last year.
The profit was attributed to an increase in revenue by percent to N780.8 million in Q1 2022 from N72.4 million in the same period last year.
Its share price declined by 19.33 percent from N1.19 to N0.96 on Thursday.
Earnings per share increased to N1 from a loss of N2
Nigerian Breweries
Nigerian Breweries also recorded its highest profit in the period under review in the past 10 years.
The company’s profit increased by 77.68 percent to N13.61 billion in Q1 2022 from N7.66 billion last year and 44.48 percent from N9.42 billion in 2013.
There was an increase in revenue by 30.37 percent to N137.77 billion in Q1 2022 from N105.68 billion in the same period last year.
Nigerian Breweries share price increased by 18.85 percent from N48 to N57.05 on Thursday. Earnings per share increased to N171 from N96.
