As everyone anticipates hard times for quoted companies in the second quarter when the economic impacts of the ongoing CORVID-19 pandemic are expected to weaken corporate balance sheets in most sectors of the economy, Securities Dealers on The Nigerian Stock Exchange have reviewed the earnings of quoted companies in the first quarter (Q1) and made prognosis on options for survival in the second quarter (Q2).
Market watchers at the last count maintained that quoted companies would embark on issuing profit warning before the end of Q 2 as companies’ accounts would come out in red due to stagnated economic activities under the current regime of lockdown nationwide, enhanced border closure, Naira devaluation, external shocks in the oil industry, unrealistic budget projection and carry over of macroeconomic vagaries and uncertainties prior to COVID-19. Although Securities Dealers generally agreed that quoted companies’ top and bottom lines would be dented by economic impacts of COVID-19, some however expressed optimism that the degree of negative impact could be moderated through application of creative and innovative models.
A peep into some of the recently announced Q 1 results revealed some slight improvements against the background of tough operating environment prior to the advent of COVID-19.But they all agreed that the Q 1 results were generally good. Cadbury Nigeria PLC’s Profit before tax increased by 26 % to N912.7 million in the first quarter ended March 2020, as against N723.9 million in the corresponding period, 2019. The famous food and beverages company’s unaudited financial statement also indicated that its profit after tax inched up by 26 % to N638.9 million compared to N506.7 million in the previous year.
Access bank’s profit before tax stood at N46.2 billion, an increase of 2.6 % above N45.1 billion in the corresponding period. The tier 1 bank’s profit after tax slightly reduced by 0.53 % to N40.9 billion in March 2020, as against N41.1 billion in 2019. United Bank for Africa (UBA) recorded a profit before tax of N32.7 billion in the first quarter, an 8.5 % increase above N30.1 billion in 2019 while its profit after tax amounted to N30.1 billion, an increase of 5 % over N28.6 billion posted in the corresponding year. The bank attributed the performance to internal efficiency among others. In the review period, Guaranty Trust Bank announced a profit before tax of N58.2 billion as against N57.0 billion last year while its after-tax profit stood at N50.07 billion, as against N49.3 billion, indicating increases of 2.01% respectively.
“Performance of the companies in the Q1 is a bit mixed. It is obvious that the effects of coronavirus on the corporate performance have not been much pronounced. But Q2 will reflect the real impact. I think companies might end up between 60 % and 70 % of what they posted in Q 1. The economy has been locked down, except health care and consumables. Unemployment is looming. Purchasing power and disposable income are under threat. Devaluation of the Naira is another issue. The budget is being reviewed as projections are no longer realistic. These and other sundry issues will impact on the companies’ bottom lines in the second quarter. It is now a game of corporate innovativeness. Companies need to review their business models without necessarily affecting the core function.
“The banks will contend with the challenges of rising Non-Performing Loans (NPLs). Corporate leaders should identity opportunities from the challenges of COVID-19 and leverage innovative models to generate profits. For instance, banks can restructure their NPLs to align with the business models of their debtors for ease of repayment, Products and services should be based on the priority of the consumers. Demands as consumers are likely to cut costs.” said the Chairman, Association of Securities Dealing Houses of Nigeria (ASHON), Chief Onyenwechukwu Ezeagu.
Appraising the Q 1 corporate earnings, the Managing Director and Chief Executive Officer, Trust Yields Securities, Alhaji Rasshed Yussuf explained that Q 1 performance was generally good, but Q 2 would be a matter of conjecture. Yussuf, however, explained that government’s management of lockdown, companies’ creativity in the handling of products and services and outcome of external shock in the oil industry would determine the extent to which corporate earnings would be affected in the second quarter. He stressed that performance of the companies at Q1 appears very good. The effects of COVID-19 have not been highly manifested. Some of the companies declared dividend. This is on the strength of the previous year’s performance.
“The Q2 is a product of COVID-19. Performance of companies is expected to be grossly affected. But it is a matter of conjecture now because some developments may moderate the negative impact of COVID-19. For instance, it depends on whether the government will reverse lockdown in which economic activities can begin to pick before the end of the quarter. We expect companies to be more creative as the current situation has called for modification of strategy. The free fall of crude oil price may be doused if Nigeria’s major buyers, including United States and China resolve the current challenges. Performance of the companies in the Q2 will ultimately be a matter of degree.”
In his opinion, the Managing Director and Chief Executive Officer, Golden Securities, Mr Bamidele Abdul who made a conservative forecast explained that corporate performance in Q 2 may range between 40 – 50 percent of the performance in Q 1. According to him, all stakeholders must be ready to play vital roles in order to revive the economy.
” The Q1 results are very fair as they are results of activities during pre COVID-19. For the Banks, the results of Q2, “epicentre period” are going to be bad. I expect it to be about 40 to 50% performance of Q1. By working virtually, the banks can do wonders. But it will be over a sustained period of 6 to 12 months. Companies should review their customer care policy to align with the current reality. They should carry all stakeholders along. Government should come up with a series of policies that will impact positively on all sectors. The Central Bank of (CBN) should put the small and medium scale industries at the heart of its economic policies as this is where major clusters of our economy reside.”, he said.
Meanwhile, ravaging effects of COVID-19 has prompted The Nigerian Stock Exchange to re-extend the due date for submission of the audited financial statements with 31 March year end by 60 days from June 29, 2020 to August 28, 2020.