Nigeria’s Companies Thrive in Corporate Earnings amid Challenges

Kayode Tokede examines the 2021 financial results of  some quoted firms in the banking, fast-moving companies’ goods, industrial and oil & gas sectors, given the numerous challenges that each sector had to pass through in the post-Covid-19 era

Companies in the banking, industrial, FMCG and oil and gas operating in Nigeria have overcome the 2020 Covid-19 pandemic as highlighted in the 2021 financial year for the period ended December 31, 2021. 

The pandemic had an outsized socio-economic impact on Nigeria, which has one of the highest rates of multidimensionality poor individuals in the world. 

However, despite the overwhelming economic crises unleashed by the disruptions of the Covid era,  Nigerian quoted companies appear to be staging a come back to profitability given the analysis of the 2021 performances of these companies.

Banking Sector Performance in 2021

So far, only three banks have released the audited result and account for the period ended December 31, 2021. The three banks are Zenith Bank Plc, Guaranty Trust Holding Company Plc (GTCO), and United Bank for Africa (UBA). 

Except for GTCO that reported a decline in profit and dividend unchanged for the second consecutive year, Zenith Bank and UBA reported impressive growth in top-bottom line performance that impacted on dividend payout to shareholders.

Take, for instance, Zenith Bank in its 2021 result and accounts for the period ended December 31, 2021, achieved Profit Before Tax that grew by 10per cent from N255.9 billion in 2020 to N280.4 billion in the current year. The increase was due to growth in the top-line and very strong management of our treasury portfolio that increased efficiency, resulting in a drop in interest expense by 12per cent from N121.1 billion in 2020 to N106.8 billion in the current year. 

The bank also achieved growth in gross earnings of 10per cent from N696.5 billion reported in the previous year to N765.6billion. This was on the back of 23per cent growth in non-interest income from N251.7billion to N309billion and a two per cent growth in interest income from N420.8billion to N427.6billion. Zenith bank’s total assets increased by 11per cent, growing from N8.48 trillion in 2020 to N9.45 trillion in 2021, mainly driven by growth in customers’ deposits. 

Zenith Bank has proposed a N97.32 billion total dividend for the financial year 2021, translating to N3.01 per share, after getting shareholders to agree to a dividend payout of N87.91 billion for the second half of the year, which translates to N2.80 per share. The bank had earlier paid an interim dividend of N0.30 per share totalling N9.4 billion for the first half of the year. It paid shareholders N3.0 per share, summing up to N94.19 billion in 2020.

Despite the huge challenging business and slow economic recovery in most of its countries of operations, UBA’s profit before tax was impressive with a 20.3 per cent growth to N153.1 billion in 2021, compared to N127.3 billion in the 2020 financial year; while Profit After Tax rose grew by 8.7 per cent to N118.7 billion in 2021, compared to N109.2 billion recorded the previous year. Total assets grew by 11 per cent to an unprecedented N8.5 trillion in the year under review, up from N7.7 trillion in 2020, thus marking the first time the bank’s assets will cross the N8 trillion mark. 

The management of UBA proposed a final dividend of N0.80 per share in the 2021 financial year from N0.35 proposed in 2020.

The proposed final dividend and the N0.20 per share interim dividend paid in September 2021, brings the lender’s total dividend for the year to N1.00, amounting to a pay-out ratio of 29 per cent from 16 per cent and a yield of 12.4 per cent.

For  GTCO, The Group’s balance sheet remained well structured and resilient with total assets and shareholders’ funds closing FY 2021 at N5.44trillion and N883.2billion, respectively.

The Group posted a Profit Before Tax of N221.5billion, representing a dip of seven per cent from N238.1billion recorded in December 2020. In the same period, the Group’s loan book (net)increased by 8.4per cent from N1.66trillion while deposit liabilities grew by 14.4per cent from N3.61trillionto N4.13trillion.

Meanwhile, the management of GTCO recommended a final dividend per share of N2.70 per share, coupled with the earlier paid interim dividend of N0.30 kobo in May 2021, hence bringing the total dividend for the financial year to N3.00kobo, same as what was paid in 2020 but a seven per cent increase from the total dividend paid in 2019.

Cement Sector

Dangote Cement with about N364.44 billion profit in 2021 from N276.07billion proposed a dividend of N340.81billion in 2021 from N272.65billion proposed in 2020.

The cement manufacturing company in 2021 proposed a dividend of N20 per unit of 50 kobo ordinary share from N16.00 per unit proposed in 2020.

Lafarge Africa’s net income, thus grew by 65.4 per cent to N51billion in 2021 from N30.84billion in 2020, driven by the net sales that gained 27.1 per cent to N293.09billion in 2021 from N230.57billion reported in 2020. 

The management of Lafarge Cement proposed N2.00 total dividend in 2021 from N1.00 proposed in 2020, representing N32.22billion dividend in 2021 from N16.11billion in 2020.

Oil & Gas 

Seplat Energy announced its audited results for the full year ended December 31, 2021, with a 321.1 per cent increase in profit before tax to N71.03billion as against N28.87 billion loss reported in the full year ended December 31, 2020.

The foremost indigenous energy company also announced a 38.2per cent rise in its 2021 full-year revenue to N293.6billion in 2021 from N190.92billion reported in 2020.

During the year, the Directors recommended and paid to members quarterly interim dividends of US2.5cents per share declared in April, July and October in line with the revised dividend distribution timetable.

In addition to this, the Board of Seplat is recommending a final dividend of US2.5 cents per share.

For TotalEnergies Marketing Nigeria Plc, it reported a profit after tax of N16.7 billion in the 2021 financial year, a clear eight times rise from the closing profit of N2 billion in the preceding year.

The company’s unaudited financial report for the 2021 full year shows a big rebound for the energy marketing company from the worst performance in years in 2020 to register new peaks in revenue and profit in 2021.

The transformation was powered largely by rebuilding sales revenue from a drop of 30 per cent in the prior fiscal year to a growth of 66.7 per cent in 2021. The company’s closing profit of N16.7 billion at full year has beaten for the first time its peak profit of N14.8 billion posted in 2016. Shareholders can hope for a decent dividend when the audited accounts are issued.

 Others

With about N298.65billion profit in 2021 from N205billion in 2020, MTN Nigeria for the 2021 financial year proposed a dividend of N212.7billion from N133billion proposed to investors for the 2020 financial year.

The telecommunication giant in 2021 proposed an N4.55 interim dividend (2020: N3.50 kobo per share) and a final dividend of N8.57kobo per 2 kobo ordinary share, bringing the total dividend for 2021 financial year to N13.12 kobo from N9.5kobo total dividend paid to shareholders in 2020.

Nigerian Breweries has announced a final dividend of N1.20 per share after recording N437 billion revenue for 2021, a 30 per cent increase over the previous year’s sales figure. That brings its total dividend declared for the year to N1.60 per share, summing up to a payout of N12.9 billion, 72 per cent higher than what it paid shareholders the previous year.

 Analysts Commend Impressive Corporate Earnings

Speaking with THISDAY, the Managing Director/CEO APT Securities and Funds Limited, Mr Garba Kurfi commended listed companies for posting impressive results and accounts for 2021, expressing concerns that the declared dividend by these companies did not reflect in the trajectory of the stock market.

According to him: “These companies have declared impressive dividend payout to investors but I do not know why the stock market did not respond to dividend payout by Dangote Cement, Zenith Bank, among others. Although the likes of GTCO and UBA released their audited accounts after the close of trading last week, I am yet to see stock price appreciation.

“Take, for instance, Lafarge Africa last year was trading at N31 and declared N1.00 per ordinary but this year, the company declared N2.00 and trading at N24.00 per share. The dividend by these companies has not reflected in our domestic market.”

The CEO, Wyoming Capital & Partners, Mr Tajudeen Olayinka, urged investors to investigate if these companies were paying from the reserve or current earnings reported on the NGX. 

“For those companies that have proposed dividend, we praise their effort. If a company is paying from current earnings, it shows effective management despite the challenges. What some of these companies are paying as dividend is substantial which is good for their stock prices.”

He added that: “It is excessive if a company is paying over 10per cent yield on its dividend to shareholders and it means these companies are operating at a higher cost per capita.”

“When you have a functional market where companies are doing well, I don’t expect a company to pay more than five per cent yield on the dividend to shareholders.

“That was the level our domestic market was in 2007 before the global economic meltdown. If a company can pay at least five per cent yield, it means they will be able to raise money at a low level per capital.”