BusinessDay

Zenith, GTB, UBA shine in race to generate cash from operations

Despite the challenging economic conditions that threatened the profitability of companies in Nigeria, Zenith Bank emerged as the top company with the largest cash generated from its core business activity in the nine-month period ended September 2022.

BusinessDay analysed the 30 biggest listed companies on the Nigerian Exchange Group (NGX) and the results showed Zenith Bank, Guaranty Trust Holding Company, United Bank for Africa, Dangote Cement, FBN Holdings, Access Holdings Plc, MTN Nigeria, Fidelity Bank, Ecobank Transnational Plc, and FCMB Group generated the most cash from their operations in the nine-month period ended September 2022.

Against all odds, these firms managed to grow their abilities to cater for their short term obligations by improving the cash-generating capabilities of their core business activities by 34.84 percent to N3.74 trillion in the nine-month period ended September 2022 from N2.78 trillion in the corresponding period of 2021. This indicates that the core business activities of these firms are thriving and provide an additional indicator of profitability potential to these firms.

Cash availability allows a business the option to expand, build and launch new products, buy back shares to affirm their strong financial position, pay out dividends to reward and bolster shareholder confidence, or reduce debt to save on interest payments.

Hence, if a company is experiencing a positive cash flow, it denotes an increase in its liquid assets, which gives it the means to meet debt obligations, pay for expenses, reinvest in the business, endure recession and finally pay dividends to shareholders.

Cash is the lifeblood of a business, and a business needs to generate enough cash from its activities so that it can meet its expenses and have enough left over to repay investors and grow the business.
Without generating adequate cash to meet its needs, a business will find it difficult to conduct routine activities such as paying suppliers, buying raw materials, and paying its employees, let alone making investments.

Nigerian companies

Company Analysis

Zenith Bank Plc

Leading the pack with the largest amount of cash generated from its core business activities is Zenith Bank Plc. Its net cash flow from operations amounted to N1.19 trillion as of September 2022, representing a 519.63 percent increase from N193.45 billion reported in the corresponding period of 2021.

After its working capital changes, that is, changes in its operating assets and liabilities, the company generated N238.64 billion in cash during the period under review, due to the N1.47 trillion reported from the increase in customer deposits during the period.
Its profit before tax for the nine-month period of 2022 totalled N202.55 billion, up 12.64 percent from the corresponding period of 2021.

Guaranty Trust Holding Company Plc (GTCO)

GTCO followed closely as the second company with the most cash generated from its core business activities, with its cash from operations amounting to N519.39 billion in the nine-month period ended September 2022. The total cash generated was 83.89 percent higher than N282.44 billion reported in the same period of 2021.

The group reported an increase in deposits from customers and loans to customers, amounting to N388.54 billion and N84.08 billion respectively as of September 2022, bringing cash generated after changes in operating assets and liabilities to N378.22 billion during the period.

Its profit for the period grew by 10.72 percent to N169.72 billion as of September 2022 from N151.91 billion in the corresponding period of 2021.

United Bank for Africa (UBA)

UBA’s net cash generated from operating activities declined by 13.21 percent in the as of September 2022 to N481.58 billion from N554.91 billion in the same period of 2021.

Despite being the group with the third largest amount of cash generated from core business activities, the cash held by the company to meet short term obligations reduced during the period.

Further analysis shows that the value of cash generated after working capital changes amounted to N294.32 billion in the as of September 2022, particularly due to the N646.32 billion increase in customer deposits reported by the bank.

The tier-one bank’s profit before tax deductions leaped by 12.27 percent to N138.49 billion by September 2022 from N123.35 billion in the corresponding period of 2021.

Dangote Cement Plc (DangCem)

DangCem generated the sum of N302.01 billion from its core operations in the first nine months of 2022, implying a 32.75 percent decline from N449.1 billion in the same period of 2021.
The decline was on the back of a N70.62 billion increase in inventories and N54.07 billion decrease in trade receivables reported by the cement maker. This means that during the first nine-month period of 2022, DangCem paid its suppliers and increased its inventories, therefore bringing its cash generated after working capital changes for the period to N404.73 billion.

The cement maker also reported a 17.16 percent decline in its profit before tax deductions to N335.90 billion in the first nine months of 2022 from N405.49 billion in the corresponding period of 2021.

FBN Holdings Plc

FBN Holdings saw its net cash generated from operating activities soar by 1,219 percent in the first nine-month period of 2022 from N19.02 billion a year earlier to N250.81 billion, thereby strengthening its ability to meet up with short term obligations during the period.

The significant growth was on the back of an increase in customer deposits which amounted to N751.10 billion, cash inflow from interest received, N357.21 billion, and a decrease in financial assets, N187.90 billion.

The tier-one bank reported a profit before tax of N105.49 billion in the first nine-month period of 2022, a 99 percent increase from N52.93 billion reported in the nine-month period of 2021.

Read also: Nigeria’s 10 most profitable companies in 2022

Access Holdings Plc

Access Holdings’ ability to meet its short term obligations declined by 68.01 percent with cash from operations amounting to N249.02 billion in the first nine-month period of 2022, down from N778.45 billion in the corresponding period of 2021.

The decline was on the back of an 80 percent reduction in cash generated by the group after changes in working capital. The cash generated after changes in working capital was down to N121.23 billion in the first nine-month period of 2022, from N617.24 billion in the corresponding period of 2021, despite the N1.24 trillion increase in customer deposits reported by the firm during the period.

Profit before tax deductions grew slowly by 8.9 percent to N147.29 billion in the nine-month period of 2022 from N135.21 billion in the same period of 2021.

MTN Nigeria Communications Plc

Net cash generated from operating activities by the telecommunications firm was down by 28.95 percent to N209.51 billion in the first nine-month period of 2022 from N294.87 billion in the same period of 2021.

MTN’s net cash generated from operations after working capital changes totalled N785.81 billion, 10 percent higher than N711.44 billion reported in the nine-month period of 2021. Profit before tax grew by 25 percent to N400.67 billion as of September 2022 from N321.35 billion in the corresponding period of 2021.

Fidelity Bank Plc

Fidelity Bank significantly grew its ability to meet up with its short term obligations by growing its cash generated from its core business activities by 1,793 percent to N199.53 billion as of September 2022, from N10.54 billion in the corresponding period of 2021.

The bank’s total cash generated after working capital changes improved to N76.99 billion in the first nine-month period of 2022, from negative N46.12 billion in the corresponding period of 2021.

Its profit before tax deductions amounted to N37.79 billion as of September 2022, representing a 34.7 percent rise from N28.05 billion in the corresponding period of 2021.

Ecobank Transnational Incorporated(ETI)

Ecobank, the Pan-African Bank reported total cash generated from operations amounting to N169.54 billion in the nine-month period of 2022, a marked increase from N-46.95 billion reported in the nine-month period of 2021.

Further analysis showed that the bank reported a N67.98 billion decrease in its treasury and other eligible bills, N128.43 billion, and N131.20 billion decrease in loans and advances to banks and customers respectively.

Profit before tax deductions reported by the bank grew by 17.41 percent to N168.69 billion in the first nine-month period of 2022 from N143.67 billion in the same period in 2021.

FCMB Group Plc

Net cash generated from operating activities by the FCMB Group as of 2022 amounted to N164.54 billion, representing 31.82 percent down from N241.34 billion in the same period of 2021.

This was on the back of a 55 percent decline in cash generated by the bank after changes in operating assets and liabilities which amounted to N82.23 billion during the period.

Its profit before tax grew by 68.36 percent to N26.50 billion in the nine-month period of 2022 from N15.74 billion in the corresponding period of 2021.

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