By Dele Sobowale

“NB’s Q1 earnings shrink 8%..Sunday Newswatch, May 4, 2014.
Union Bank declares N5bn profit for Q1, Punch, May 5, 2014.
“Ecobank’s 2013 profit fell by 48%, Punch, May 2, 2014.

Last week, companies listed on the Nigerian Stock Exchange, NSE, were classified into three. Those who render their Annual Reports and Accounts on time, or even ahead of time; those who fail to meet the deadline by a few weeks; and those who, invariably, have to be forced to issue their reports

. The first category of companies represents those who had a successful year and are just too eager to tell the entire world about it. The second include firms who had mixed results and need time to determine how to present the results to stakeholders in the best possible light. The third were the failures who know too well that there is no way any amount of vanish can hide the bad news they have to release to their shareholders.

Let me now reveal another game the Board members and the managements of the last two categories of companies play every year. Having achieved a lackluster or disastrous year, the first thing is to delay the release of the previous year’s result and then work very hard to obtain a good result for the first quarter of the current year.

By so doing, they hope to minimize the impact of the previous year’s results on their share prices on the capital market. Sometimes, it works. But, the quarter one results, which they hastily publish, is not an audited account and none of them can be held responsible for it – if gullible investors rush to the market to pay more for their shares. After all, “It is the buyer’s fault if he fails to ask if the horse is blind.” (VANGUARD BOOK OF QUOTATIONS p 24).

Most Nigerian investors are so gullible they assume that first quarter represents what can be expected for the rest of the year. Any Sales or Marketing Director will be too happy to educate them. I was one; so I know the game played with investors money.

Virtually, all the companies reporting first quarter results for 2014 are trying to wipe the tears off investors’ eyes for 2013. Nigerian Breweries Plc, the nation’s largest beverage producer and its closest rival, GUINNESS Nigeria Plc had very difficult time last year. GUINNESS was worse and 2014 is starting out badly for them as well. Investors holding large numbers of those securities need advice regarding the prospects for this year.

Unfortunately, most of the Stockbrokers will not be able to tell them because the Stockbrokers don’t know. But, I know what will happen to the breweries this year. I spent almost eight years in the sector and the determinants of demand have remained the same.

From the time it arrived in Nigeria, as Barclays Bank, D.C.O until it was “Con-soludo-ted”, Union Bank Plc was, indeed, “Big, Strong and Reliable”. It was one of the two banks, in Nigeria, in which you could “keep your money and go to sleep with your two eyes closed.” Something happened to it after the Tsunami of “Con-soludo-tion” hit it.

Today, it has become one of our banks in intensive care unit. Its report of N5bn profit for Q1, would not even have been good news when “Union Bank was Union Bank”. The report should send shivers down the spines of all the people still holding the bank’s shares — for a very simple reason. “The figure however represents a 36 per cent, or N2.28bn decline on the N7.8bn the group posted for the corresponding period of 2013.”

Union Bank was not alone in dispensing misery to those clutching on to its securities. ECOBANK has not informed its stakeholders, at home and abroad, about first quarter results for 2014. But, it has given them a hard bone to go and chew regarding 2013. Profits fell by 48 per cent – almost meaning that shareholders should expect no dividends this year.

The new Managing Director, Mr Albert Essien, reportedly, said, “Our profitability for 2013, has been impacted by increased impairment provisions. A significant proportion of these relates to certain legacy assets in Nigeria..”. Reduced to layman’s language, what Essien had said, means that there might be more difficult times ahead for the bank and its shareholders. Investors should keep their ears and eyes open for what might happen at the Annual General Meeting.

Even now in May, there are still a lot of companies, quoted on the Exchanges, whose directors are still to render the accounts of their stewardships. Again, readers holding those securities should apply the second rule of watching the capital market. The longer it takes for the reports to be released the more likely it is that it contains bad news.

Finally, banks, this year are facing difficult times. With the Federal government withdrawing its funds from commercial banks, Customs generating less  revenue on account of high tariff on rice and import prohibition slapped on several goods, duty waivers granted, beverages sector slowing down and paying less duty on volume, crude oil prices steadily declining, and elections about to start, the banks will need all their ingenuity to reach 2013 levels in revenue and profit projections.

And, the 2014 Federal budget has not yet been passed. It is going to be a difficult year – anyway you look at it.

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