Berger gets boost from $1.4 billion in contract awards
Julius Berger Nigeria Plc, the country’s largest construction company by market value, forecast a 45 percent jump in 2018 revenue as the economy recovers from a 2016 contraction and the foreign-exchange market stabilizes.
The Abuja-based company, which derives two-thirds of its earnings from government contracts, expects revenue to grow to 210 billion naira, spurred by contracts in the past year valued at 500 billion naira ($1.4 billion), Managing Director Wolfgang Goetsch said in a May 24 interview at the company’s office in the Nigerian capital.
“From 2014 to 2017 we had a decline in revenue,” Goetsch said. Combined with the weakening of the naira, the company registered a fall in earnings of almost 70 percent in dollar terms, he said. “With five months already into the year, our forecast is we will have very significant growth, of about 45 percent,” this year.
Julius Berger, which has operated in Africa’s most-populous country since 1965, saw earnings slide as Nigeria suffered its worst economic contraction in 25 years in 2016 as a slump in the price of oil, its main export, caused foreign-currency shortages. After a 3.82 billion-naira loss in 2016, the company made a profit of 2.57 billion naira last year, though revenue stayed flat at 141.9 billion naira.
Losses were incurred by the company as it bought foreign exchange in a volatile market, according to Goetsch. “Since the exchange rate stabilized, this cost element of foreign-exchange losses is getting smaller and this has helped us in overall profitability.”
Projects being undertaken by the company include building access roads in Abuja’s central business district, roads and civil works at Dangote Group’s oil refinery now under construction in Lagos and a new bridge on the Niger River near the southeastern city of Onitsha. Julius Berger has also moved to diversify its operations into the energy industry, where it has formed a partnership to explore an oil field, he said.
The company is in talks with the government, its main debtor, and is putting pressure on clients behind on payments as part of an effort to recover outstanding payments of about 60 billion naira, he said. It’s also discussing with lenders on rescheduling its debts now worth 33.6 billion naira.
“The construction industry has initiated negotiations with the government on a so-called debt recovery program,” Goetsch said. “That means government will raise bonds and these bonds will be given to the contractors and we can sell the bonds and generate cash.”
Nigerian lawmakers approved on May 17 a 2018 budget of 9.1 trillion naira, its biggest yet, with almost a third of the expenditure going to major infrastructure works including roads, rail, ports and power. President Muhammadu Buhari will have to sign his approval for the plan to become law.
(Adds CEO’s comment in penultumate paragraph.)