Does Q3-2020 Corporate Earnings Reflect the state of Nigeria’s economy?


So far in the week, the market has been awash with Q3-2020 corporate earnings. Some of the notable results submitted included WAPCO, AIRTELAFRICA, STANBIC, UCAP, FLOURMIL and much recently, MTNN, all published strong growth numbers.

By sector, the performance of FLOURMILS and NASCON showed that favourable government policy for Agro-allied and Food Processors, especially the closure of the border, supported volume growth amid lockdown induced pent-up demand that was met in Q3.

WAPCO’s performance also indicated increased cement consumption with profitability further supported by lower finance charges. For the Telco’s, increased data, digital and Fintech/payment revenue continued to drive growth, as observed in the numbers for MTNN and AIRTELAFRICA.

Finally, STANBIC and UCAP’s performance reflects resilience in the financial services sector, with asset management fees, other non-interest income and low cost of fund buoying profitability.

While we expect GDP growth in Q3-2020 to remain negative, as observed in Q2-2020, negative growth in Q3-2020 is likely to improve significantly, going by corporate earnings above, compared to the -6.1% contraction observed in Q2-2020.

We imagine that the full re-opening of the economy and low interest-rate environment will support the performance of food processors, Agro-allied and industrial businesses.

The Banks are expected to stay resilient, supported by the low cost of fund and non-interest income. Meanwhile, growth in the Telecom space is expected to be sustained in the realities of COVID-19.

Nevertheless, activities in the Trade, Real Estate/Hospitality and the larger informal sector are projected to remain significantly subdued worsened by the unrest across the country.

United Capital Plc Research

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