Nigeria | NGX

In the previous week, the Monetary Policy Committee (MPC) held a 2-day meeting where committee members voted on potential policy changes. The MPC voted to maintain status quo on all its monetary policy tools, retaining the MPR at 11.5%, CRR at 27.5%, Liquidity ratio at 30.0% and the Asymmetric corridor of +100/-700 around the MPR. The decision to hold all policy parameters at current levels is intended to create a stable environment to allow for stronger economic recovery, as the recessionary pressures facing the country remain, as seen with the growing unemployment rate.

In its recently released FY-2020 audited financials, ARDOVA Plc (“ARDOVA” or “the Company”) reported a 3.1% y/y growth in revenue, printing at N181.9bn, from N176.5bn in FY-2019. Revenue growth was driven by increased sales of petroleum products, which grew by 3.4% y/y in FY-2020. Cost of sales grew at a slower pace, up 2.6% y/y to N169.7bn in FY-2020. As a result, gross profit recorded a decent 12.1% y/y growth to print at N12.1bn in FY-2020. However, Operating income dropped by 16.0% y/y to N4.1bn, largely driven by the 2019 high base due to gain on disposed assets recorded. As such, Profit before tax and Profit after tax declined by 37.6% and 52.6%, to N2.9bn and N1.8bn, respectively, in the period under review. Earnings per Share (EPS) fell 52% to N1.4 per share in FY-2020. The firm proposed a dividend of N0.19 per share. We review our forecasts for the company and present our outlook below.

Last week, Nestle Nigeria Plc (NESTLE) submitted its financial result for FY-2020. According to the report, Revenue grew marginally by 1.1% y/ y to N287.1bn in FY-2020 from N284.0bn in FY-2019. However, the company faced some cost pressures during the year and saw Cost of Sales grow by 7.7% y/y. Overall, the pressure from input cost and higher Interest expense weighed on profitability as Profit before Tax (PBT) and Profit after Tax (PAT) declined 14.7% and 14.2% respectively. Following the new numbers, we update our forecasts and valuation with details in the report.

In its recently released FY-2020 scorecard, NB reported a 4.3% y/y growth in Revenue, printing at N337.0bn, from N323.0bn in FY-2019. The growth in Revenue was driven by a solid recovery in H2-2020 where Revenue grew 21.2% y/y compared to 10.8% y/y decline in H1-2020. The company faced significant cost pressures during the year, emanating from inflationary pressures and naira devaluation impact on raw material costs. As a result, Gross profit fell 9.6% y/y to N118.7bn. Despite controlled Operating expenses, higher Finance costs (up 50.8% y/y) pressured profitability during the year as Pre-Tax profits and Net income plunged 50.4% and 54.3% to N11.6bn and N7.4bn, respectively. We review our forecasts for the company and present our outlook below.

Zenith Bank Plc (“ZENITH”) released its FY-2020 results earlier, reportinga 5.2%y/y growth in Gross Earnings (GE) to N696.5bn. Also, PBT and PAT rose 5.2% and 10.4% to N255.9bn and N230.6bn while Loans and deposits expanded by 19.1% and 25.3% to N3.6trn and N5.3trnrespectively. We update our estimates and we review our expectations below.

In the previous week, major activities in the macro space tilted towards growth and fiscal balance. On growth, the IMF stated in its latest Article IV consultation for Nigeria that growth expectation for Nigeria is projected to come in at 1.5% in2021, lower than the 2.0% expectation by the CBN. Revised forecast by the IMF is based onpolicy inadequacy amid the threat of the second wave of Covid-19 infections. Also, the IMF believes that growth in Nigeria can only return to pre-COVID 19 era in 2022. On the fiscal side, the CBN revealed that FG’s fiscal deficit rose by N208.1bn to N620.5bn as of the end of November from N421.4bn at the end of October.