Lubes Maintain Prime Status
11 Plc’s (MOBIL) 9M:2019 scorecard has distinguished it apart from its peers – for its ability to consistently grow topline in a year with grim operating conditions. Relative to 2018, gross revenue added an impressive 13.17%, to print at NGN141.51 billion. While overall contribution as at 9M was only 18.73% (NGN26.50 billion), the lubricants segment remained as pivotal as ever to MOBIL’s revenue growth (+14.90% Y-o-Y). The Fuels segment also consolidated its recovery; 9M:2019 Fuel sales expanded by a sizeable 11.83% to pitch in at NGN114.04 billion (9M:2018: NGN101.98 billion).
Nevertheless, the segment’s overall contribution came in lower, as other business lines picked up. Growth in LPG retail was similarly sustained; MOBIL has made NGN0.97 billion this year alone, contributing 0.68% to overall revenue (9M:2018: 0.00%). MOBIL is strategically positioned to take advantage of the burgeoning cooking gas market and is putting NIPCO alliance (which has a strong market presence within this segment) to good use in driving volumes.
[READ MORE: MOBIL’s tepid recovery stirs optimism]
Standalone Q3:2019 revenue was up 24.47% to NGN48.71 billion (vs. NGN39.13 billion in Q3:2018 and NGN46.73 billion in Q2:2019), driven by expansion in Lubricants (+26.41%; NGN9.16 billion) and Fuels (+22.90%; NGN39.19). LPG sales also grew 13.75% (+NGN0.36 billion) Q-o-Q. It is no longer realistic to expect a PMS price hike in 2019, but our outlook on the MOBIL’s topline growth, however, remains upbeat, on the back of lubes and other white products. 2019FY revenue growth is now expected at 16.43% (NGN191.65 billion).
Direct Costs Persist as a Key Pressure Point
In Q1, direct costs were at their highest – 92.80%. While this tapered to 91.67% in Q2, it picked up again in Q3, printing at 91.91% – a mirror of the challenges industry operators have with landing costs. Consequently, overall Cost-to-Sales as at 9M:2019 was 91.89% (NGN130.03 billion). For context, the ratio was only 89.78% (NGN112.26 billion) in 9M:2018. Operating expenses have been muted but ticked up by 34.53% (+NGN0.72 billion) in Q3 on the back of higher selling costs. Operating profit, therefore, contracted by 15.23% to NGN9.54 billion – a margin of 6.74% (9M:2018: 9.00%). Pretax profit and net income were also strained by higher finance costs and settled at NGN9.40 billion (- 19.27%) and NGN6.34 billion (-19.41%) respectively, implying a net margin of 4.48% (EPS: NGN17.59).
Rental Income Remains the Shock Absorber
It is a renowned fact that MOBIL’s property business provides a solid buffer for its margins. In 9M:2019, rental income constituted 40.16% (NGN2.55 billion) of overall net income. For context, net margin would have been 2.68% without this key business segment. While this is higher than the 34.13% contribution for 9M:2018, it is lower in absolute terms by 5.16% (9M:2018: NGN2.69 billion). Having grown at a CAGR of 38.06% since 2015, we maintain our stance that rental income will remain the key profit driver for 2019FY, even though it is a non-core part of the business.
Higher Payables prop up operating accruals
As at 9M:2019, operating cashflow improved to NGN15.95bn (9M:2018: NGN4.45 billion) – dwarfing net income, as MOBIL recorded a substantial uptick in trade & other creditors (+140.73%).
Outlook and Recommendation
MOBIL has sustained the recovery that kickstarted in Q2, even though we maintain that there is ample room for progress. We are banking on further expansion in lubes and LPG to consolidate the positive momentum, but still expect a Y-o-Y contraction in net income by 10.34% (vs. previous expectation of -13.91%) to NGN8.36bn. 2019FY expected EPS is now NGN23.19, and with a target PE of 6.85x, we have a target price of NGN158.83, an upside of 7.39% to the current share price of NGN147.90 and a 4.11% premium to our previous target price of NGN152.56. We maintain a HOLD recommendation.
eTRANZACT International Plc records a loss of N72.6 million in 9M 2020.
eTRANZACT International Plc has posted a loss of N72.6 million for the period ended September 2020.
eTRANZACT International Plc has posted a loss of N72.6 million for the period ended September 2020 – a 15.3% decline.
This is according to its latest financials sent to the Nigerian Stock Exchange market today.
Key highlights of the 2020 9M financials include:
- Revenue declined to N5.45 billion, down by -16.1% Y-o-Y.
- Both Loss Before Tax and Loss After Tax deteriorated to a loss of N72.6 million, up by +15.3%.
- Cost of sales declined to N5.17 billion, down by -15.3% Y-o-Y.
- Gross profit declined to N281.7 million, indicating a loss of 28.1% Y-o-Y.
- Administrative expenses declined to N492.1 million, down by -0.5% Y-o-Y.
- Investment income declined to N31.33 million, indicating a decrease of -48.4% Y-o-Y.
- Finance cost decreased to N5 million, down by -42.8% Y-o-Y.
- Property, plant and equipment increased to N667.9 million, up by +20.1% within the period under view.
- Total assets grew to N6.95 billion, up by +2.8% within the period under view.
What you should Know
eTRANZACT International Plc has been battling to recover since the scandal that rocked the company in 2018, the same year it posted a loss of N268 million. By Q2 2019, the firm seemed to have overturned the deficit, posting a profit of N96.09 million.
However, since the beginning of the year, the firm had subsequently recorded a loss in both quarters of the year. These losses seemed to have eroded the gains made by the firm in 2019.
Tantalizers suffers loss of N245 million in 2020 9M
Tantalizers suffered a pre-tax loss of N245million between January 1st and September 30th, 2020.
Tantalizers Plc, a leading fast-food company in Nigeria, has disclosed that it suffered a pre tax loss of N245million between January 1st and September 30th, 2020.
This is according to the information contained in its unaudited financial statement for the period ended 30 September 2020, which was sent to the floor of the Nigerian Stock Exchange today.
Key highlights of its 2020 9M results
- Revenue was N655.93 million, compared to N1.26 billion it generated same period in 2019.
- Cost of Sales was N355.44 million, compared to N729.71 million it incurred same period in 2019.
- Other income was N114.94 million, compared to N268.27 million it made same period in 2019.
- Administrative Expenses was N606.19 million, compared to N940.90 million it incurred same period in 2019.
- Operating loss was N189.30 million, compared to operating profit of N127.05 million.
- Finance cost was N55.70 million, compared to N94.40 million it paid same period in 2019.
- Loss before tax was N245.00 million, compared to profit after tax of N22.17 million it made same period in 2019.
The on-trade-channel of the leading fast-food company with over 60 restaurants across Nigeria as of 30th April, 2017 was severely affected by the COVID-19 pandemic, as the widespread economic vulnerabilities in the nation disrupted the business segment of the company.
The lockdown and the restriction placed on businesses operating in the on-trade-market affected the on-premise demand and sales of these companies, which led to decline in the sales and net revenue of Tantalizers Plc.
However, the core business segment of Tantalizers was not the only segment affected, as other revenue-generating segments like Rent, advertisement and franchising declined over this period.
Afreximbank’s African commodity index dips by 1% q-o-q in Q3 2020
Afreximbank African Commodity Index for Q3 2020 shows that the composite index fell marginally by 1% q-o-q.
However, the agricultural commodities sub-index emerged the top performer in the quarter; thus, growing more than the gains achieved in base and precious metals.
According to the report, the highlights of the AACI for Q3-2020 are as follows:
- Energy sub-index fell by 8%, largely as a result of oil price fluctuations.
- Agricultural commodities sub-index rose by 13%, partly as a result of favorable weather conditions in the major producing countries.
- Sugar prices gained based on the strong expectations of firm import demand from China and fears that Thailand’s crop could shrink in 2021 following a drought.
- Cocoa futures enjoyed a pre-election premium in Ghana and Côte d’Ivoire.
- Cotton rose to its highest level since February 2020, as a result of the threat of Storm Sally on the US cotton harvest, coupled with poor field conditions in the US.
- Coffee rose by 10% as La Nina weather conditions in Vietnam, the world’s largest producer of Robusta coffee, raised the possibility of a shortage in exports.
- Base metals sub-index rose by 9%, due to several factors including ongoing supply concerns for copper in Chile and Peru and strong demand in China.
- Precious metals sub-index rose by 7% in the quarter, as the demand for haven bullion continued in the face of persistent economic challenges triggered by COVID-19 and heightening geopolitical tensions.
- In addition, Gold enjoyed record inflows into gold-backed exchange-traded funds (ETFs), which offset major weaknesses in jewelry demand.
What they are saying
According to Dr. Hippolyte Fofack, Chief Economist at Afreximbank, “Commodity prices in Q3-2020 have largely been impacted by COVID-19. The pandemic has exposed global demand shifts that have seen the oil industry incur backlogs and agricultural commodity prices dwindle in the first half of the year.
“The outlook for 2021 is positive — however conservative the markets are. We hope to see an increase in global demand within Q1 2021 and Q2 2021, buoyed by the relaxation of most COVID-19 disruptions and restrictions.”
What you should know
- AACI is a trade-weighted index designed to track on a quarterly basis, the price movements of 13 different commodities that are of interest to Africa and the Bank.
- To effectively mitigate risks associated with commodity price volatility, AACI highlights areas requiring pre-emptive measures by the Bank, its key stakeholders and policymakers in its member countries, as well as global institutions interested in the African market.
- AACI highlights the generally conservative market sentiment with consensus forecasts predicting prices to stay within a tight range in the near term, with the exception of crude oil, coffee, crude palm oil, cobalt, and sugar.
- African Export-Import Bank (Afreximbank) is a pan-African multilateral financial institution with the mandate of financing and promoting intra-and extra-African trade — owned by African governments, the African Development Bank, and other African multilateral financial institutions, as well as African and non-African public and private investors.