Corporate expenses increase to N510bn

But beats inflation by 3.9 percentage points

By Peter Egwuatu

FINANCIAL results of some selected companies leading their various sectors have indicated successful strategies in taming the impact of inflationary pressures on the corporate bottom-line.

The administrative and operating expenses of these 36 companies in the first quarter of 2017 (Q1’17) which marked the peak of the 16-month long steady inflation spike, rose by 14 per cent to N510.2 billion from N447.7 billion in 2016.

At an average inflation rate of 17.92 per cent in Q1’17, the corporate entities showed greater efficiency, beating inflation by 3.92 percentage points. Consequently, the Profit Before Tax, PBT, at N284.9 billion, rose 26 per cent as against the 14 per cent rise in cost of doing business.

Notably the companies had embarked on cost management efficiency measures, doing more with less, though the high cost of operations in the country continued to impact negatively on corporate entities’ earnings.

Sectoral performance

A cursory review of the performance of these companies in the five sub sectors covered in this batch of analysis showed that the banking sector recorded the highest profit as the 14 banks that turned in their first quarter financials ended March 2017 to the Nigerian Stock Exchange recorded N233.3 billion PBT, representing 81.9 per cent of the 36 companies’ PBT; while total expenses stood at N412.6 billion, representing 80.9 per cent of the 36 companies’ cumulative expenses of N510.2 billion.

Following the Banking sector is the Consumer Goods sector, recording N22.851 billion, representing eight per cent of the 36 companies’ PBT, while its expenses stood at N52.26 billion, representing 11.7 per cent of the 36 companies’ cumulative expenses.

The Food Products sector came third on the sectoral chart, with five of the companies recording N18.9 billion, thus accounting for 6.6 per cent of the 36 companies’ PBT, while its expenses stood at N25.466 billion, thus representing 5. 7 per cent of the 36 companies’ total expenses.

The Insurance sector came next on the chart, with nine companies posting N4.9 billion, thus accounting for 1.7 per cent of the 36 companies’ PBT, while its total expenses stood at N6.3 billion, representing 1.2 per cent of the 36 companies’ cumulative expenses; following the insurance sector was Conglomerates sector , recording N4.9 billion PBT, thus representing 1.7 per cent of the 36 companies’ PBT, while its expenses stood at N7.3 billion, representing   1.4 per cent of the 36 companies’ cumulative expenses.

Banking sector

There are 14 companies in the banking sector of the NSE, which comprise of First City Monument Bank, FCMB Plc , United Bank for Africa, UBA Plc, Fidelity Bank Plc , Zenith Bank Plc, Sterling Bank Plc, Wema Bank Plc, Union Bank Plc , Access Bank Plc,   Guaranty Trust   Bank, GTBank, Plc.

Others are Stanbic IBTC Bank   Plc , First Bank of Nigeria, FBN Holdings Plc,   Diamond Bank Plc, Unity Bank Plc   and Ecobnak Transnational Incorporated, ETI Plc .

Stanbic IBTC recorded the highest growth in PBT in percentage term, rising by   82 per cent in the first quarter of 2017 ; it was followed by GTBank, which went up by 64 per cent , while both Zenith Bank and Access Bank tied, occupying the third position rising by 38 per cent each .

On absolute figure,   GTBank occupied the first position recording N50.4 billion in the first quarter of 2017 as against N30.7 billion in the corresponding period of 2016, it was followed by   Zenith Bank   , which recorded N44.2 billion as against N32.1billion, while Access Bank occupied third position recording N31.2 billion as against N22.6 billion.

Consumer Goods sector

The sector, which comprises of Nigerian Breweries Plc, Guinness Nigerian Plc, Champion Breweries and International Breweries, recorded a total PBT of N22.85 billion in the first quarter of 2017, which indicates a growth of 15 per cent from N19.9 billion in the corresponding period of 2016.

Guinness led the chart in the sub sector, with a growth of 105 per cent, followed by Nigerian Breweries 16 per cent, while International Breweries followed behind, but recorded a 21 per cent decline in profit.

In absolute term, Nigerian Breweries led the sub sector with N17.4 billion PBT in the first quarter of 2017 as against N15 billion in the corresponding period of 2016; it was followed by International Breweries recording N2.9 billion PBT as against N3.6 billion, while Guinness occupied third position, recording N2.5 billion from N1.2 billion. 

Food Products Sector

The Food Products sector , which   comprises of   PZ Cussons, Unilever Nigeria Plc, Cadbury Nigeria Plc and Nestle Nigeria Plc recorded a total PBT of N18.912 billion in the first quarter of 2017, showing a growth of 46 per cent from N12.9 billion in the corresponding period of 2016.

Nestle Nigeria Plc led the sector in percentage term as it rose by 64 per cent followed by Unilever, which surged by 54 per cent and PZ Cussons 10 per cent.

On absolute term, Nestle led with N14.3 billion in the first quarter of 2017 from N8.7 billion in the corresponding period of 2016, followed by PZ Cussons with N2.4 billion from N2.2 billion, while Unilever Nigeria occupied third position with N2.2 billion from N1.4 billion. 

Insurance Sector

This sector comprises of 9 companies, which are: Mutual Benefits Assurance Plc, Sovereign Trist Insurance Plc , Prestige Assurance, Lasaco Assurance, NEM Insurance, Axa Mansard Insurance, Staco Insurance, Regency Alliance Insurance and Continental Reinsurance. The sector posted a total of N4.898 billion PBT in the first quarter of     2017, representing a decline of 13 per cent from N5.605 billion in the corresponding period of 2016.

Mutual Benefits Assurance topped the sector’s PBT in percentage term, rising by 115 per cent, followed by Sovereign Trust Insurance with a growth of 80 per cent while, Regency Insurance came third with 49 per cent growth.

On absolute term, Axa Mansard Insurance topped the sector’s PBT , recording N912 million in 2017 as against N751 million in 2016, it was followed by Mutual Benefits , which posted N876 million as   against N408 million in 2016, while   NEM Insurance   recorded N715 million as against N2.7 billion in 2016. 

Conglomerates sector    

The Conglomerates sector has AG Leventis, John Holt, SCOA Nigeria Plc, Transnational Corporation of Nigeria, Trascorp Plc, and UACN. The sector recorded a total of N4.888 billion in the first quarter of 2017, representing a decline of 35 per cent from N7.561 billion in the corresponding period of 2016.

Virtually all the companies in the sector recorded decline in PBT , except   Trasncorp, which rose marginally by 0.3 per cent to N1.7 billion from N1.763 billion in the corresponding period of 2016.  

Capital Market operators reactions

In his reaction on the corporate performance for the first quarter 2017, the Chief Executive Officer, Highcap Securities Limited, Mr. David Adonri, said “The increase in corporate profits and reduction in cost during Q1’17 indicates that fundamentals of the capital market have improved. Market has reacted appropriately by recent bull run.

“Further improvement in market fundamentals is expected as the economy recovers from stagflation. Analysts are already predicting that the All Share Index, ASI could reach 40,000 this year.”

In his own part, Mr. Sewa Wusu, Head, Research & Investment Advisory, SCM Capital  said “Corporate performance for the first quarter 2017 is good development. Intervention by the  Central Bank of Nigeria, CBN, has significantly impacted on the companies’ performance as it provided dollar liquidity. So, if that can be sustained apart from the threat of oil price decline, I think by and large, the companies’ earnings in second quarter will be better than the first quarter as inflation continues to drop.

We can also see that  the stock market is simply responding to the improvement in the economy, which we hope will be sustained till the end of the year.

Confidence is gradually becoming strong in our market  also   as foreign investors now know what amount they can invest in the market with the stability in FX

 

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