Forex losses impacts Nigeria’s NGX industrial sector

An examination of both the NGX industrial sector index and companies’ financials operating within the industrial sector shows the varying impacts of exchange rate unification and fuel subsidy removal as reflected in their revenue, pre-tax profit, share price YtD gain and the sector index.

The Naira went from N465/$ at the end of May 2023 to N756/$ in June 2023, resulting in a net exchange loss of N116.1 billion on third-party loans and payables within the Nigerian entities.

While some experienced significant declines in some performance indicators, others performed relatively better.

A review of the financial performance of Berger Paints, Beta Glass, BUA Cement, CAP, Dangote Cement, MEYER, Notore, and WAPC, reveals that among these companies, Dangote Cement, Notore, and BUA Cement on NGX reported a combined foreign exchange losses of -N129.811 billion, while Beta Glass, CAP, and WAPCO reported an aggregate foreign exchange gain of N3.49 billion.

However, when considering the cumulative impact of foreign exchange fluctuations, it led to an overall reduction of 8.19 per cent in their total pre-tax profit, which amounted to N372.573 billion in the first half of 2023

Dangote Cement led in foreign exchange losses recording a significant foreign exchange loss of N113.63 billion, representing a 179.47 per cent year-on-year increase, the highest in the past five years.

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According to the first half of 2023 financial notes, the net exchange loss on foreign-denominated transactions was primarily attributed to the sharp devaluation of the Nigerian Naira in June 2023.

These losses had a direct effect on the decline in pre-tax profit, which decreased from N264.89 billion to N239.86 billion during the reviewed period.

Notore also reported a substantial foreign exchange loss of N14.05 billion in the first half of 2023. Coupled with low revenue and a significant increase in finance costs, this contributed to a pre-tax loss of N38 billion, representing a 1,558 per cent decline.

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The company managed to generate revenue of N7.92 billion, a substantial decline of 68.97 per cent for the first half of 2023.

BUA Cement reported a foreign exchange loss of N2.137 billion in the first half 2023, marking a significant year-on-year increase of about 103 per cent.

Coupled with elevated interest expenses, this dampened pre-tax profit, resulting in only a marginal increase of 2.75 per cent to N76.425 billion when compared to the first half of 2022.

WAPCO – Lafarge led the foreign exchange gainers, recording a N2.237 billion gain in foreign exchange. This contributed to a growth of 18 per cent in pre-tax profit.

However, despite this positive performance, the company on NGX experienced a year-on-year decline of 5.16 per cent in profit after tax, primarily due to high-income tax expenses.