In 10 numbers, how Nigeria's biggest companies have fared in 2020

Nigeria’s biggest publicly listed companies have faced a myriad of challenges in the first half of the year 2020 with the COVID-19 pandemic and oil price crash eating into companies’ earnings and overall profitability while shooting up their expenses.

The economy is expected to enter its second recession in four years by the third quarter after contracting by a record 6.1 percent in the second quarter.

Companies are typically on the receiving end of a recession which affects their sales growth and hurts profit.

In Nigeria’s case, lower sales is not the only challenge companies must contend with, but also rising costs on the back of an acute dollar scarcity -caused by lower oil prices- that has forced several businesses to source dollars at a premium of around 20 percent at the black market.

When companies’ profits fall and costs rise materially, it leads to job loses. There’s been a spate of companies announcing job cuts in Nigeria with the most recent being oil and gas firm, Chevron which announced that it will shed 25 percent of its workforce.

Increased job loses will be particularly worrying for Nigeria where unemployment rate is at a decade-high of 27.1 percent and is forecast to hit 45 percent by year-end by economists at trade advocacy group, Lagos Chamber of Commerce and Industry (LCCI).

The following numbers dive deeper into the struggles of the 30 biggest listed companies on the Nigerian Stock Exchange (NSE) in H1 2020.

-24%

The biggest firms saw a combined profit after tax of N695 billion in the first half of 2020, a 24.36 percent decline from the N919bn recorded in the first half of 2019.

Given the unexpected occurrence of the COVID-19 pandemic, this drop in profit after tax between 2019 and 2020 on a half-year basis is largely driven by costs rising 4.9 percent faster than revenue.

N5.43trillion

The revenue of the NSE 30 firms combined increased by 2.57 percent to N5.43trillion in H1 2020 from N5.29trillion in H1 2019.

This indicates that despite higher total revenues, the N192.4bn increase in cost surpassed the N136.13bn rise in revenue within the period under review and that contributed to lower profits.

N2.76trillion

Costs incurred by the entire NSE 30 companies rose to N2.76trillion in half-year 2020, a 7.48 percent increase from N2.57trillion in June 2019.

This figure again proves that revenue growth was much slower than the rise in cost.

64%

Companies in the Agriculture sector were the most profitable of the 30 companies surveyed in H1 2020 as the combined profit of the two companies representing the sector, Presco and Okomu Plc, grew by 64 percent to N8.39bn from N5.1bn recorded in the same period last year. Presco and Okomu produce palm oil.

While Presco plc grew profit after tax by 70 percent to N4.39 billion from N2.57 billion in H1 2019, Okomu recorded a profit after tax of N4 billion, a 58 percent increase from N2.5 billion as at June 2019.

N475bn

The biggest financial services companies grew their combined profit after tax by 1.40 percent to N475.3bn in H1 2020 from N468.78bn in H1 2019. The numbers analysed are for the twelve commercial banks that feature in the NSE 30.

The combined share prices of the 12 banks dropped by 6 percent to N10.68 as the market closed on October 5th 2020 compared to N11.4 in January 2020.

The companies that gave the sector a boost in the H1 2020 are Fidelity bank, First City Monument Bank (FCMB), Stanbic IBTC, First Bank and Zenith Bank as they grew profit by 33 percent, 28.8 percent, 24.7 percent, 23.8 percent and 16.9 percent respectively.

On the other hand, United Bank for Africa (UBA), Ecobank Transnational Inc (ETI), Union Bank of Nigeria (UBN) Guaranty Trust Bank (GTB) and Access Bank saw profit dip by 21.7 percent, 18 percent, 9 percent, 4.9 percent and 1.36 percent respectively.

–N35.8bn

The three oil and gas companies that make up the NSE 30 posted a combined loss of N35.8 billion in the first half of the year. The companies surveyed include, Total Nigeria, Seplat and 11plc.

Mobil (11 plc) was the only oil and gas company that made a profit during the period, even though profits dipped by 39.6 percent to N2.5 billion in H1 2020, from N4.17 billion as at June 2019.