As the country’s macro economy
challenges thicken, five high stocks companies quoted on the Nigerian Stock
Exchange (NSE) have recoded decline in profits.
So far, Nigerian Breweries Plc,
Cadbury Nigeria Plc, Transnational Corporation of Nigeria Plc (Transcorp)
Stanbic IBTC Holdings Plc and Wema Bank Plc have released their unaudited six
months result for the period ended June 30, 2015 that indicated low performance
in intrinsic value.
Nigerian Breweries show its profit
after tax dropping by 10.03 per cent from N23.87 billion to N21.5 billion while
Cadbury Nigeria reported a loss after tax of N250.7million for the first six
months of 2015, compared with a profit of N1.26 billion declared in the same
period of last year.
Transnational Corporation of
Nigeria Plc recorded 37.8 per cent
decline in profit after tax from N6.89 billion to N4.3 billion as its cost of
sales gained 29 per cent to N8 billion in June 30,2015.
Two financial institutions that
have released their half year results to market stakeholders also recorded weak
performance as hike in operating expenses impinged profits.
For example, Stanbic IBTC Holdings
recorded a profit after tax that declined by 40 per cent from N16.18 billion to
N9.7 billion in June 30, 2015.
Furthermore, profit after tax of
Wema Bank Plc dropped from N1.45 billion to N997 million.
Analysts at the stock market have
attributed the decline in companies decline to hike in cost of production,
devaluation of Naira and the dwindling global oil price.
While referring to Cadbury Nigeria
results, analysts at FBN Capital said, “The insecurity in the north of the
country, lower disposable incomes and the devaluations of the naira have proved
difficult to overcome.
“While there are now active steps
to restore security in the northern regions of the country (mainly the north
east), we do not expect a quick turnaround in earnings for the industry.
“This situation is even more
difficult for Cadbury, given its limited product portfolio. To a large extent,
the devaluations of the naira have weighed on Cadbury’s performance during the
quarter.
“Besides cocoa, which Cadbury
actively sources locally, other primary raw materials such as sugar and milk
are mainly imported.”
According to them, sequentially,
Cadbury’s numbers show a slight improvement from what it delivered for the
first quarter of 2015.
Looking ahead, the company said,
“We do not anticipate a recovery in consumer appetite in 2015, given the
difficult macro environment.”
They noted that despite the strong
revenue growth, unit volumes were still constrained by the tough macro
environment and weak consumers discretionary spend.
“As reflected in Stanbic IBTC
Holdings’ Q2 2015 results, we believe the shrinking share of household wallets
is partly responsible for what we are seeing in Nigerian Breweries’ results,
aptly depicted by the non-payment of salaries of government workers which
weighed on the bank’s results.
“Given that about 40-50per cent of Nigerian
Breweries’ raw materials are imported, we believe the gross margin contraction
was due to a higher cost of raw materials following the 18per cent depreciation
of the naira since the beginning of last quarter of 2014.
NB has recently launched the ACE roots herbal
brand to challenge Guinness Nigeria’s Orijin brand to cater for the mid-range
segment. However, it is early to tell how successful Ace’s entry into the
market has been.
“When annualised, NB’s half year
profit before tax tracks behind consensus by around nine per cent.
Nevertheless, we expect a neutral reaction from the market to these results. NB
shares have underperformed the index year till date (ytd).
“They are down by -19per cent ytd compared
with the -9.5per cent ytd return delivered by the index, they added.
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