Stocks hit a four-month high earlier this week, lifted by gains in Nigeria’s largest indigenous energy conglomerate, Oando PLC, and improved investor sentiment towards the country’s recession-hit economy. The stock market had gained N117 billion by Tuesday this week to extend a bullish eight-day run, while Oando rose by 131%, its highest level in 18 months.
Analysts at Afrinvest Limited said that the upbeat performance in the equities market was mainly driven by solid Q1 2017 earnings, as well as the knock-on effect of improved foreign exchange liquidity.
The upturn was significantly impacted by gains recorded in medium and large capitalised stocks. Oando, who remained at the top of the gainers list for five straight days led 33 other gainers on Thursday, May 9 including Access Bank, FBN Holdings, Guaranty Trust Bank, Dangote Cement, Nigerian Breweries, Okomu Oil, Zenith Bank and Stanbic IBTC.
Oando’s return to profitability and increase in share price is indicative of the successful implementation of its corporate initiatives focused on Growth across its operations; Deleverage via the divestment of non-performing assets; and Profitability, by focusing on dollar-denominated export earnings.
At the recently concluded Facts Behind the Figures session at the NSE, the ED Business Development, Nigeria Stock Exchange, HauraJalo-Waziri spoke positively to Oando’s FYE 2016 and Q1 2017 financials; also speaking was Oando PLC’s Group Chief Executive, Wale Tinubu “The challenge we faced was the economic and sector downturn, we came clean to the market, created a 5-point plan and successfully delivered on every part of that plan.”
The company deleveraged its balance sheet through the divestment of its upstream services company Oando Energy Services and embarked on the expansion of its retail and gas footprint through a strategic partnership with Helios Investment Partners and Vitol Group to recapitalize its downstream business for US$210 million and the US$115.8 equity buy-in of its Gas and Power business by Helios Investment Partners.
Oando acquired a N108 billion medium-term-loan with 11 Nigerian banks; this medium term 5-year consolidated facility, with a 3 year moratorium on principal, enabled the overall restructure of the Group’s obligations. Today, Oando’s borrowings have significantly reduced by 29% to N225.9 billion in the first quarter of 2017 from N355.4 billion in the first quarter of 2016 and its year to year return increased by 103.62% compared to the comparative period in 2016, quelling concerns of critics.
The successful deployment of the company’s five-pronged strategy is evident in its FYE 2016 results with a N3.5 billion profit-after-tax, a 107% increase from the loss of FYE 2015. A review of Oando’s results further show positive performance across all financial indices, turnover increased by 49% to N569 billion from N382 billion in FYE 2015, while EBITDA increased by 51% to N71.0 billion from N47.0 billion in FYE 2015, boosting investors and shareholders confidence in the company and its management team.
In Q1 2017, Oando’s turnover grew by 116% to N138.4 billion and gross profit by 53% to N13.4 billion compared to the first quarter of 2016. Profit-Before-Tax increased by 207% to N494 million compared to (N461 million) in the first quarter of 2016 while profit-after-tax decreased by 58% to N1.7 billion compared to N4.1 billion in Q1 2016.
“The first quarter earnings underscore our proactive decision to focus on our dollar denominated export businesses. Our resilience is evident in our capacity to grow via a diversified model, and as we continue to chart our deliberate path in this challenging business environment, we look forward to better performance in the quarters to come,” said Tinubu.
With the gradual decline in pipeline disruptions, increased efforts by the government to curb security issues in the Niger Delta, and an upturn in oil prices north of $50, the sector is optimistic of a near term recovery. “The plan is to go from 60,000boedp by the last quarter 2017 to 80,000 in 2018 and hopefully 100,000 by 2020. We also got approval from the president to repair, operate and maintain the Port-Harcourt refinery together with our partner Agip. We plan to increase the refinery capacity from 30% to a 100%, subsequently to 120%” the Group Chief Executive said at the NSE.
The bullish performance of the NSE further affirms the International Monetary Fund’s (IMF) projection that Nigeria’s economic growth would rise by 0.8% in 2017. The IMF said: “After contracting by 1.5 percent in 2016 because of disruptions in the oil sector coupled with foreign exchange, power, and fuel shortages, output in Nigeria is projected to grow by 0.8 percent in 2017 as a result of a recovery in oil production, continued growth in agriculture, and higher public investment.” This will in turn impact the economic growth of the country, projected to rise to 2.6 percent in 2017 and 3.5 percent in 2018.