Julius Berger hit by N14.23 billion foreign exchange acquisition loss

…Posts N3.81 billion in FY’16

Julius Berger has been hit by N14.23 billion in foreign exchange acquisition loss, fueled by a sudden devaluation of the naira by the central bank.

 

Firms that have dollar denominated debt in their capital structure saw it balloon as the adoption of a flexible exchange rate regime by the  Central Bank of Nigeria (CBN) bank saw the naira lose 37 percent of its value against the U.S currency.
The foreign exchange loss  were the bulk of the N21.45 billion exceptional items that swung Julius Berger from a net profit of N2.44 billion as at December 2015 to a  loss of N3.81 billion the period under review.

Underlying operating profit came to N16.79 billion in the period under review, up 42.16 percent while revenue moved by 3.85 percent to N139 billion.

Analysts say the construction industry is the hardest hit by the lower oil price and severe dollar shortages that saw the economy slip into its first recession in 25 years.

FAAC allocations to states suffered and the federating units and the Centre were unable to pay salaries and embark on capital projects.

“In a time of recession the first sector that will suffer are the real estate and construction companies. Again firms are not investing in new projects; they are in a survival mood,” said Igbuan Okaisabor, vice president/CEO of KAISER Construction Limited.

“If construction workers don’t have jobs, they will not buy nails, paints and other building materials. We are cutting jobs by shedding jobs and that is bad for the economy,” said Okaisabor.

The construction firms lost significant revenue they would have earned had the 2016 budget been passed in an expeditious manner.

Analysts say the speedy passage of the 2017 budget will spur construction activities and firms will benefit as the demand for building material will spike.

Nigeria’s cabinet approved a 20 percent increase in spending proposals next year, taking the figure to 7.3 trillion naira ($23.3 billion), according to the Budget and Planning.

“Quoted firms in the building materials and real estate industry have been under pressure, with most of them recording a drop in sales and net profit,” said Pabina Yinkere, head, Research Division Vetiva Capital Management Limited.

Further analysis of the financial statement of Julius Berger shows sales increased by 4.51 percent to N139 billion while cost of sales fell by 7.33 percent to N84.76 billion in December 2016 from N91.47 percent the previous year.

Total operating expenses were up 22.34 percent to N37.34 billion in December 2016 from N30.52 billion as at December 2015.

Julius Berger has total assets of N259.17 billion as at December 2016 while shareholders fund stood at N25.31 billion the same period.   

The company’s share price closed at N41.95 as of 2:00 pm while market capitalization was N55.37 billion.

 

BALA AUGIE