Dangote, First Bank, Nigerian Breweries declare decline after-tax

Oba Otudeko, Chairman, FBN Holdings

Nigerian giants of industry, Dangote Cement, FBN Holdings, and Nigerian Breweries, among others, are declaring after-tax losses, relatively from last year's. Reports from the websites of the companies quoted by Financial Nigeria, show that although they are making appreciable volume growth, they are grossly falling short on after-tax margins.

Dangote Cement

Dangote Cement reported that its gross revenue for the nine months period ended on September 30, 2016 rose by 21 per cent to N442.09 billion. The company’s top line growth was driven by record sales in Nigeria and increased production in other countries.

However, the company said after-tax profit fell by 15 per cent to N133.52 billion compared to N157.99 billion posted in a similar period last year due to the impact of lower cement prices in Nigeria and higher import costs caused by the devaluation of the naira.

For the period under review, basic earnings per share fell by 17 per cent to N8.13 from N9.8 declared a year earlier. The company’s stock closed at N175 per share last week Thursday, only up 0.48 per cent from the previous day’s close.

Last year, Dangote Cement slashed its cement prices by N300 as it sought to boost sales in order to mitigate the impact of Nigeria’s economic challenges. But the company later increased cement prices by N600 in August this year as it began using costlier low pour fuel oil (LPFO) and coal owing to declining gas supplies from the Niger Delta. Consequently, Dangote Cement said its gross margins fell to 40.4 per cent from 58.3 per cent in 2015.

FBN Holdings

For FBN Holdings, the parent company of First Bank of Nigeria, its financial report for the nine-month period ended on September 30, 2016, showed that after-tax profit fell by 15.3 per cent to N42.52 billion from N50.22 billion posted in a similar period of last year.

Higher provision for loan losses has dragged down the bank’s profit. The decline in FBN’s profit is mainly attributable to huge loan loss provisions, which rose 146 per cent to N114.72 billion from N46.64 billion reported in 2015.

However, revenues rose by 7 per cent to N417.3 billion from N390 billion a year earlier driven by foreign exchange revaluation gains of N68.4 billion during the period under review.  FBN’s profit and revenue fell below analysts’ estimates of N56.8 billion and N448 billion, according to CardinalStone Partners, a Lagos-based investment advisory firm.

FBN Holdings has been hit hard by the slump in oil prices, which caused the bank’s Oil & Gas loan portfolio to deteriorate since it has the largest exposure to the Oil & Gas sector compared to other banks, according to Fitch.

The company said non-performing loans rose to 24.9 per cent in nine months compared to 4.8 per cent a year earlier. Basic earnings per share fell to N1.17 per share from N1.38 billion posed a year earlier. FBN’s stock closed at N3.03 per share, up 1 per cent from the previous day’s close.

Nigerian Breweries

Nigerian Breweries also released its financial statement for the nine months ended September 30, 2016, showing that the beverage manufacturing giant’s after-tax profit fell 23.2 per cent to N20.1 billion, compared to N26.2 billion posted in a similar period of year earlier.

The decline in Nigerian Breweries’ profit has been attributed to surging finance costs relating to its commercial paper programme. The company said finance costs rose 95.3 per cent to N10.2 billion from N5.2 billion in the previous year. 

Sales revenue rose to N222.7 billion, 3.6 per cent higher compared to N214.9 billion posted in 2015. Gross margins, however, declined to 43.7 per cent as foreign exchange pressures caused import costs to rise. 

Nigerian Breweries’ profit and revenue fell below analysts’ estimates of N28.9 billion and N229.6 billion, respectively, according to CardinalStone Partners. Nigerian Breweries is the country’s largest beer company, controlling about 70 per cent share of the local beer market. Heineken, the Dutch beer giant, owns 54.29 per cent of Nigerian Breweries.

Jean-François van Boxmeer, Heineken’s Chairman/CEO, said in a third quarter trading update that “in Nigeria, volume increased low single digit. Underlying trading conditions remain difficult as the weaker macroeconomic environment and consumer sentiment continue to drive negative brand mix.”

“Although the Naira devaluation on 20 June 2016 initially provided some improvement in liquidity, the Naira has continued to weaken, which will have a further impact on margins.”

Nigerian Breweries has declared an interim dividend of N1 per share despite basic earnings per share declining to N2.54 per share from N3.30 per share a year earlier. The company’s stock traded at N146 per share on Friday, down 0.34 per cent from the previous day’s close.

Edited by ‘Dele Dele-Olukoju, Marketing Communication consultant and publisher of the online Marketing Communication Digest. He writes from Lagos, Nigeria.