The recently concluded quarterly earnings reports season of listed companies on the Nigerian Stock Exchange (NSE), as would be expected, showed the actual financial health and where they really stand, going into their various financial year-ends.
Generally, the numbers for the period under consideration came below expectation and market forecast, especially the top line, as more than 40% of companies released flat profit numbers, despite the mild growth in bottom line.
It must be noted that sales revenue growth rates in the Q3 corporate earnings were very slow and weak, following through from the previous quarters, even as they reflect Nigeria’s economic fundamentals and coming just after Nigeria’s economic recession in 2016/2017.
A look at the Q3 numbers as a whole, by matching the actual numbers with expectations, and benchmarking them against those of the corresponding period of last year, shows an obvious underperformance that can be seen in their weakened sales revenue. Profit levels were slightly above average in the period due mainly to cost cutting measures, as well as extraordinary incomes, that were mostly one-offs.
Amongst the banks, for example, rising oil price over the period impacted positively on their loan books, given that a sizeable chunk of their exposure was to oil companies, as well as the power sector. The rise in oil price at the international market meant that operators in the industry in the oil and gas sector could repay their loans, including some that had been previously termed lost and duly provisioned for. This was seen in the figures presented by some banks as they reported write-back of such previously provisioned “bad and doubtful” loans, resulting in bigger profit margins.
That notwithstanding, positive surprises were very few in the recent Q3 earnings season, a repeat of what happened in the half-year outing, when there were a few companies with positive revenue.
One thing that is not in doubt is the slowdown economic activities and declining growth rate as reflected in the recent corporate earnings picture, with numbers from many notable companies in the Industrial Goods, Consumer Goods and Healthcare, coming weak. This was due to an unholy alliance of factors like high production and, or operating costs, weak purchasing power among Nigerians and unstable government policies, forcing many quoted companies to under-perform.
These takeaways have given insights into what to expect between February and March 31, 2019, when the audited score-cards for 2018 full-year will pour in and whether directors of these companies can recommend distribution of juicier dividends or not. It will also be a period when some will make a leaner offering, or regrettably, none at all.
Historically too, the full-year earnings season is a time that traditionally attracts more participant to the equity market in their hope for dividend.
Note, however, that the possibility of dividend cut is high among quoted companies with December 31 year end, going by the Q3 numbers released so far by them.
This is why it is necessary to know how as an investor, you can play the dividend season intelligently with the help of deep research as discussed in the home study pack of INVEST 2019 summit held last December.
Take advantage of low prices in the market today to position in the right stocks that would ensure you recover lost grounds and grow your income.
To track the prices and earnings trend of selected stocks on the Nigerian Stock Exchange, see Investdata Price & Earnings Tracking for the year. It will guide you on companies with numbers trending up or down fundamentally. You will also see those companies that are positing negative numbers.
RE: INVEST 2019
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Ambrose Omordion
CRO|Investdata Consulting Ltd
info@investdataonline.com
info@investdata.com.ng
ambrose.o@investdataonline.com
ambroseconsultants@yahoo.com
Tel: 08028164085, 08032055467
