• Thursday, March 28, 2024
businessday logo

BusinessDay

Companies that outperformed the NSE ASI in 2018

Stocks beat fixed income as inflation subdues returns

The impressive gain that was recorded in the equities market in 2017 could not be sustained in 2018 as the market closed on a negative 17.8% YTD return. This according to market experts can be attributed to broader emerging market sell-off, US Policy normalization, higher US Treasury yields, coupled with sluggish domestic recovery and overhang of political jitters that weighed on investors ‘sentiment in 2018

A sectorial glance at the year’s performance underscored underwhelming performances across sectors. The Industrial players (-37.3%) led the laggards. Notably, WAPCO fell 72.3%y/y owing to company-specific pressures amid cash-flow concerns and intense competition in the cement sector.

However, despite all the challenges in the industrial goods sector, Paint makers, Berger and CAP recorded a 1.3% and 2.5% gain, Beta Glass gained 33.1% to end the year in green.

READ ALSO: Nigeria stock investors gain N350bn in one week

While CCNN led the movers chart in 2018 at 104.2%. CCNN Regarded as an efficient company, the impressive performance by CCNN was as a result of the company’s cost control mechanism that shows cost are been minimized. The company’s shift to the use of coal in its new plants which is cheaper than the lower pour fuel (LPO) is part of the company’s cost-cutting mechanism.

It recently completed a merger deal with BUA group owned subsidiary Kalambaina cement. The merger according to Abdul Samad Rabiu, Chairman of CCNN is to further boost efficiency, productivity, output and better returns of CCNN. With the merger, CCNN will have a total installed capacity of 2million metric tonnes and will set the company as the dominant cement player in the key regional markets in Northern Nigeria with almost unfettered access to key export markets in West Africa.

CCNN also has the fastest growing margins. An analysis of financial performance of CCNN during the period 9 months 2018 revealed that the company grew its earnings by 97 percent to N4.01 billion against N2.036 billion in the previous year. While Profit margin of CCNN in the first nine months of 2018 grew by about 6 percent to 20.5 percent of N19.57 billion in revenue against a 15 percent profit margin of N13.628 billion in revenue as at 2017.

For Consumer Goods sector factors ranging from a new charge on alcoholic beverages and the intense rivalry among brewers (following the entry of AB-InBev), Poor Purchasing power among consumers which means manufacturers cannot transfer the increasing operating cost to consumers, to weaker revenue growth for the food producers due to the Apapa gridlock, resulted in a -23.3% decline in the sector. Major gainers in this sector include Healthcare giant, Fidson which gained 33.8%, Neimeth also gained 4%, May & Baker down by 5.8%, while Nestle was also down by 4.6%.

Performance for the Banks (-16.1%) largely mirrored the state of the market even though Tier-2 lenders reported a better return due to their low market pricing; Tier-1 (-17.4%) and Tier-2 (+15.3%). And unlike 2017, Banks were unable to make money from short time securities in 2018 as yield was high hence interest income grew at a sluggish rate compared to 2017.

Leading the Banking sector gainers chart is Unity Bank which gained 101.9%, followed by Sterling with 75.9%, Diamond and FCMB with 45.3%, 27.7% respectively. The rally in Unity Banks was initially due to news of a planned $1 billion investment by Milost Global, a private equity firm. The PE firm later terminated the agreement following threats from an unnamed investor.

The insurance sector was more resilient in 2018 buoyed by news of a possible reconsolidation in the insurance sector. NEM Insurance top gainers in the Insurance sector with 62.7% followed by Custodian Insurance and AIICO with 45.2% and 21.2 % respectively.

Elsewhere, policy inertia consistently weighed on investments in the downstream subsector as players continued to battle with capped margins, while oil price