Don’t expect returns in Q4, market operators warn investors

  • Five top firms lose N99bn in Q3 
  • Companies avoiding scrutiny – Investors

As the current economic recession continues to affect businesses in Nigeria adversely, investment and market analysts have expressed worry that most public liability companies may not be able to pay dividends or issue bonuses at the end of the 2016 financial year.
The experts have also expressed fears that the economic lull may have profound implications on the expectations of shareholders of the companies, a development industry watchers say may force most of the blue chip companies to take their Annual General Meetings out of Lagos, to escape shareholders’ scrutiny.
These fears were further heightened as indications emerged that some of the companies might embark on share reconstruction.
But shareholders have warned that if the companies make such move, the state of the stock market may worsen with grave consequences for both quoted firms and their investors.
The Managing Director, Highcap Securities Limited, Mr. David Adonri, blamed the low returns on investments on the state of the nation.
“With so much uncertainty and volatility in the stock market, the attractive yields in the money market could severely impact on the value of stocks. If the companies declare losses, they cannot afford to reward their investors at the end of their financial year,” he stated.
The market operator added that the country had been plagued with serious economic and financial challenges, which had resulted in activities being slowed down, especially in the financial sphere, which included the Nigerian Stock Exchange and quoted companies.
Also, the Managing Director, APT Securities and Funds Limited, Mallam Kurifi Garba, said the negative reaction of portfolio investors to the flexible foreign exchange policy, which was supposed to motivate them to return to the capital market, was partly responsible for the bearish state of the market, which also affected the companies. According to him, some of the companies may consider the share reconstruction option as a strategy to survive the recession. “If there is a directive from the Central Bank of Nigeria, the market and the companies will recover the loss recorded in the last three quarters. The share prices can be better and dividend paid, if things turn around economically, and the regulator ensures its policies are well thought out before making declarations in the public,” he added.

Uba Group

Expectedly, shareholders of the quoted companies are threatening to be a clog in the wheel of the companies, unless certain demands are met.
In separate interviews with The Point, some of them said they were not ready to accept the share reconstruction offer, if raised during the companies’ AGMs.
The National President, Progressive Shareholders Association, Mr. Boniface Okezie, is one of the investors awaiting the decision of the quoted companies come March 2017, when most of them are expected to hold their AGMs.
Though, he admitted that the poor performance of the companies’ Q3 results was a strong indication that there would be no dividends payout at the end of the 2016 financial year, he, however, insisted that shortchanging investors through share reconstruction should not be an option.
“Shareholders have been shortchanged in the areas of share reconstruction and some of these companies during AGMs go to other states outside Lagos in order to avoid questions or shareholders’ scrutiny.
To the General Secretary, Ibadan Zone Shareholders Association of Nigeria, Mr. Eric Akinduro, investors alone should not bear the brunt of the economic recession.
According to him, no one is expecting companies to pay dividend, when the economy is in bad shape, but it is necessary for the management of the firms too to take responsibilities.
“Directors of some quoted companies still earn ‘jumbo’ salaries with other benefits, despite the recession. If the shareholders have to make sacrifices, the directors should also cut their salaries and forego other benefits like changing vehicles every three years and upkeep of domestic staff, among others,” he argued.

As the economy continues to bite harder, five quoted firms have recorded unimpressive third quarter performances. The firms released their third quarter results to the NSE last week.
Data gathered by The Point revealed that the companies include Dangote Cement Plc, Nestle Nigeria Plc; Oando Energy Group Plc, Lafarge Africa and International Energy Insurance Plc.
The supposedly blue chip companies joined the league of weak firms in the stock market as their profits in the Q3 result dropped by N98.92 billion collectively.
Analysis of the results showed that profit after tax of Dangote Cement dropped by N24.47 billion in Q3, which ended September 30. The company attributed the drop, from N157.993 billion recorded in Q3 2015 to N133.521 billion in Q3 2016, to the crisis of foreign exchange, which gulped N231.684 billion of its revenue.
Despite the lull in the economy, the Managing Director of the company, Mr. Onne Van der Weijde, assured investors that the management was confident of delivering strong growth by the end of the 2016 financial year.
For Nestle Nigeria Plc, its PAT dropped by 97 per cent as it slid from N17.2 billion in the same period in 2015 to N484.7 million in Q3 of 2016. Consequently, the conglomerate giant’s profit before income tax also dropped by 73 per cent, from N20.8 billion to N5.5 billion, while income tax expense rose 40 per cent to N5.0 billion from N3.6 billion, recorded in the same period of 2015.
The Company Secretary and Legal Adviser, Mr. Bode Ayeku, attributed the dwindling profit to the naira devaluation and increase in income tax, explaining that the revenue of the company increased by 19.9 per cent for the nine-month period, “which is a confirmation that our brands continue to enjoy strong patronage from consumers in spite of the inflationary pressures, weak purchasing power and the challenging operating environment.”
In the case of Oando Plc, the oil company declared a loss of N35.9 billion for the nine month period ended September 30, compared to a loss of N47.2 billion recorded in the same period last year.
Other extracts from the group’s balance sheet showed that shareholders’ fund grew by 213 per cent to N159.1 billion, up from N50.9 billion, while total assets stood at N1.1 trillion from N946 billion in the same period of 2015.
Also, Lafarge Africa sustained a loss after tax of N37.4 billion for the nine-month period ended September 30, a 215 per cent decline from a profit after tax of N32.4 billion in the corresponding period of 2015.
The Point gathered that the cement manufacturing group’s results showed that net sales declined by 25 per cent to N161 from N215 billion in 2015 while cost of sales declined marginally to N142.9 billion from N143.3 billion. Selling and marketing expenses grew by 18 per cent to N3.9 billion.
The Chief Executive Officer, Lafarge, Mr. Michel Puchercos, said, “Our focus on volume and prices started to deliver during the 3rd quarter. In September, all our plants were running at record performance level, Mfamosing Line 2 started its operation on August 28 (clinker) and prices increased by 650N/bag in September, representing above 40 per cent price change.”
International Energy Insurance Company, another quoted company at the NSE recorded net premium income of N1.60 billion as at September 30, compared to N2.62 billion reported for the nine months ended September 30, 2015. The company also reported loss before tax of N641.8 million compared to N598.3 million losses it sustained a year ago.