Analysis of Custodian Investment Plc’s 2020 Q3 results revealed that investment in stocks rescued the company from reporting a loss in 2020 Q3. The company would have made a loss if not for gains on quoted investment stocks.
The company had operated poorly in the period under consideration. Even though gross revenues had increased by 42% to N22.5 billion and other investment and operating income by 47% to N19.8 billion in the period under consideration; the 97% increase in operating expenses to N23.8 billion eroded the gains.
The pressure on its gross margins was due to higher payment of claims leading to an underwriting loss of N4 billion for the quarter. underwriting losses year to date is now N5.6 billion.
Summarily, it was the significant rise in the net fair value gains on quoted investments that delivered the company, so that it recorded increased pre-tax, post-tax profits, and Earnings Per Share in the period under consideration. The net fair value gains on quoted investments surged from N503.5 million loss in the same period last year to N4.75 billion in the period under consideration.
Insurance company business models are hinged on investing premiums in fixed income securities or equities. Custodian’s investment in equities over fixed income securities paid off leading to the gain of N4.7 billion in Q3 alone. Year to date, gains on investments is N10.1 billion already surpassing the N5.2 billion gain it earned in the whole of 2019.
This has helped boost bottom line as pre-tax profits increased by 2.8% to N1.73 billion and Earnings Per Share increased by 9.1% to 24 kobo in the period under consideration.
In line with Custodian Investment Plc’s strategy to diversify its financial service offerings, the company, on 30 September 2016, invested in the equity of Interstate Securities Limited, a stockbroking firm and a dealing member of the Nigerian Stock Exchange.
The investment is made up of 321,626,098 ordinary shares representing 46.9% of the company’s issued ordinary shares and 82,500,000 5% Convertible Preference shares.
What you should know
Nairametrics recently reported that Custodian Investment Plc had agreed to buy a majority stake in UPDC. The report indicated that the company planned to acquire a 51% stake in UPDC, a real estate company.
The company noted that it believes the deal will provide Custodian with a platform to capture arising real estate opportunities. It also immediately provides recurring cash flow visibility and attractive yields as a result of its direct exposure to Nigeria’s leading real estate investment trust (“UPDC REIT”) — with a track record of profitability and annual dividend distribution, which offers a good compliment for our product portfolio.
Cost of building materials rise by over 60% in one year
The price of building materials in the market experienced a rise of over 60% in the last one year.
The cost of Cement, Steel, Tiles and Plaster of Paris (PoP) cement, among others have risen by over 60% between March 2020 and March 2021.
For instance, the cost of steel, which was sold at N234,000 per tonne as of March 2020, had increased to N380,000 at the end of March 2021. This represents a 62% increase within the period under review.
While Dangote Cement increased from N2,600 to N3,800 (though it is sold at N3,600 in some areas in Lagos), Lafarge Cement and BUA Cement increased from N2,400 and N2,250 to N3,600 and N3,250 respectively within the same period.
The price hikes are not limited to the cost of steel and cement alone but also to other materials like Tiles, PoP cement, and roofing sheets.
The cost of super white cement increased from N2,500 (25kg) to N3,700, and the cost of high-quality white cement (40kg) also increased from N4,000 to N6,500.
The cost of gravel increased from N80,000 to N140,000; that of 8mm diameter and 25mm diameter (imported) increased from N234,000 and N245,000 to N330,000 and N380,000 respectively.
Doors are not left out in the hike. Costs of Flush door (high quality), Panel door and Turkish steel door (1,500 x 2,100) also rose from N35,000, N40,000, N165,000 to N60,000, N75,000 and N235,000 respectively.
Why the hike?
Industry experts have attributed the hike to persistent depreciation of the naira and the rising cost of other building materials.
Tunde Oluwole, a fellow of the Nigerian Institute of Builders, explained that the development was caused by high interest rate, inflation, increasing exchange rate and scarcity of forex in the country.
He said, “The increasing prices in Nigeria is a result of the combined effects of high-interest rates, devaluation of the naira, inflation, and non-effective distribution network of the materials.”
To Kolawole Adebisi, an Estate Developer, the development in the cement industry is caused by the ban of imported cement in the country.
He told Nairametrics that he is not against the ban, as the government’s intention is to boost local production of cement but explained that “the local manufacturers were unable to produce enough cement to meet the demand and this contributed to the rising cost of the product.”
FG to extend fuel subsidy for 6 months
Reports indicate that the FG plans to spend N720 billion for the next 6 months on Premium Motor Spirit (PMS) subsidies.
The Nigerian Government may have suspended plans to end its subsidy payments as reports indicate that the FG plans to spend N720 billion for the next 6 months on Premium Motor Spirit (PMS) subsidies.
This was disclosed in an exclusive report by The Guardian on Sunday, citing that President Muhammadu Buhari ordered that the subsidies remain in place for the next 6 months.
“Specifically, President Buhari has asked the Nigeria National Petroleum Corporation (NNPC) to suspend any idea on subsidy removal for five to six months so that a plan that does not harm ordinary Nigerians is evolved if the deregulation must go on,” a Government official said.
What you should know
- NNPC GMD, Mele Kyari disclosed last month that the “NNPC may no longer be in a position to carry that burden because we cannot continue to carry it in our books,” after reports of fuel imports under-recovery revealed the FG was spending N120 billion a month on subsidy.
- Kyari also hinted that they may soon start selling PMS at market prices saying: “NNPC importing PMS at market price and selling at N162/L. The actual market price should be between N211 and N234/L. Meaning is that consumers are not paying the market price.
- “NNPC is currently the sole importer of PMS, and we’re trying to exit the underpriced sale of PMS. Eventual exit is inevitable, when it will happen I cannot say, but engagements are ongoing because the government is cognisant of the implications.”
Nairametrics | Company Earnings
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- Jaiz Bank proposes dividend worth N884 million for shareholders.