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Analysts bet on January GDP, PMI for positive corporate earnings

By Nkiruka Nnorom

FINANCIAL analysts have said that expansion in Gross Domestic Product, GDP, in fourth quarter, Q4, 2017 and the Central Bank of Nigeria, CBN’s, Purchasing Managers, PMI, Index supports the expectation from capital market stakeholders that 2017 full year corporate earnings will come in strong.

The GDP figure released last week by the National Bureau of Statistics, NBS, shows that the economy expended by 1.92 percent year-on-year (y/y) in Q4’17, thereby maintaining its positive growth since the emergence of the economy from recession in Q2 2017.

CBN Headquarters

In the quarter under review, aggregate GDP stood at N31.21 million in nominal terms higher when compared to N29.17 million in Q4 2016, resulting in a nominal GDP growth of 6.99 percent.

According to the CBN, PMI report for the month of February, manufacturing and non-manufacturing activities, sustained expansion during the month, at 56.3 points and 56.1 points respectively – albeit at a slower pace compared to the previous month.

Consequently, analysts at an investment banking firm, Cordros Capital, said that the figures strengthen expectation for sustained output growth in the first quarter of 2018.

“Juxtaposed with January’s data, the figures under review strengthen expectation for sustained output growth in the first quarter of 2018; hence positive corporate performance, bullish sentiments towards risky assets and stronger expectation for lower yields on government securities.”

Meanwhile, six of the corporate results already released on the Nigerian Stock Exchange, NSE, shows a mixed performance. Africa Prudential, for instance recorded 39 percent growth in revenue to  N3.4billionduring the year ended December 2017, compared to N2.4billion in 2016. its profit after tax rose toN1.7billion, 68 percent YoY growth compared to N1.0billion in FY 2016.

Nigerian Breweries Plc posted N334 billion revenue during the year from N313 billion in 2016, representing 10 percent increase, while its profit after tax rose by 16 percent to N33 billion from N28 billion recorded in the preceding year.

Seplat Petroleum Development Company returned to profitability, recording N81.11 billion post tax profit against N45 billion loss after tax in 2016, a 260 percent increase. The company’s revenue was up 78 percent to N138 billion from N63 billion in the previous year.

Transcorp Hotel Plc recorded a mixed performance with the revenue for the period falling by 9.6 percent to N13.84 billion from N15.31 billion in the preceding year. Its profit for the period stood at N2.69 billion, a marginal 1.9 percent increase compared to N2.64 billion in the preceding year.

Total Nigeria Plc, on the other hand, had a bad year as it recorded one percent in revenue and 46 percent decline in revenue and profit after tax to N288.06 billion from N290.95 billion and N8.02 billion from N14.8 billion respectively.

United Capital Plc’s revenue for the 2017 financial year declined to N5.53 billion from N5.92 billion, representing 6.9 percent decline, while the post tax profit was also down 36.9 percent to N4.36 billion from N6.91 billion in 2016.


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