Profitable despite FX, interest expense squeeze

OLUWATOSIN EMMANUEL OLADETAN Oluwatosin Oladetan, (MBA, ACCA, PMP, NIM, MICBC, FMVA, BIDA, SPY-SP, TRCN), a vice president (finance), public policy expert, corporate and business strategist, independent director, trusted advisor, is a Volunteering Contributing Analyst with Business a.m.

Okomu Oil

BUA Foods

Dangote Cement

This is the second part in the series: “Nigeria’s Path to Economic Recovery”. In the first part we presented an overview of the strain on the Nigerian economy in the years 2023 and 2024. An analysis of selected companies in the NGX 30 index, which will be continued in this series, was carried out to present key highlights of major publicly listed companies harnessing opportunities or negatively impacted by the unpleasant economic environment. Presco Plc has a market capitalization of ₦785 billion from one billion issued shares at a closing market price of ₦785 per share as of the market day ended April 04, 2025, making it the firm with the highest market capitalization in the NGX 30 index agriculture sector. The other firm in the NGX 30 index agriculture sector is Okomu Oil. The major activity of Presco Plc is the plantation and processing of palm and other related agricultural produce. On 24 March 2024, the Exchange was notified of changes to her board of directors, as Titi Osuntoki resigned from the board effective 13 November 2024. Iquo Ukoh and Osayi Alile were appointed as independent non-executive directors to fill casual board vacancies until the next annual general meeting. The audited financial statement for Presco Plc has not been uploaded on the NGX portal. OKOMU OIL For the purpose of the sector analysis, Okomu Oil Palm Plc will be considered with a market capitalization of ₦520 billion from 954 million issued shares based on the listed price of ₦545.20 for the market day that ended on April 04, 2025. Okomu Oil Plc notified the exchange of the resignation of Osaro Idah effective 24 March 2025 and the appointment of Osaretin Edosomwan as a non-executive director with effect from 27 March 2025. On March 28, 2025, Okomu Oil also reported on the compliance with the Nigerian Code of Corporate Governance 2018 in line with the requirement of the Financial Reporting Council of Nigeria. The 2024 financial statement analysis for Okomu Oil revealed that revenue increased by 73.36 percent, majorly driven by a 60.42 percent increase in palm oil production and 183.26 percent growth in rubber sales. The gross profit margin recorded in 2024 was 82.59 percent, but PBT margin of 41.13 percent as a result of high squeeze from realized foreign exchange loss, management fees chargeable for technical support, administrative and managerial services provided by SOCFINCO, short-term rentals on buildings, duties and other indirect taxes. The net profit margin for the period is 30.69 percent higher than the previous year's net profit margin of 27.49 percent. The basic and diluted earnings per share for the period are ₦41.89, 93.58 percent higher than the 2023 position of ₦21.64. The cash and cash equivalents increased by 105.12 percent and currently account for 14.81 percent of the total assets. The cash and cash equivalent to total asset ratio is relatively high, as Okomu Oil could optimize more benefits by investing in operations or projects to deliver more economic benefits to the firm. Trade payables increased by 50.01 percent. This does not present a risk, as the available bank balance is able to settle all the outstanding short-term payables obligations. BUA FOODS Bua Foods Plc has a market capitalization of ₦7.524 trillion from 18 billion issued shares at a closing market price of ₦418 per share for the market day ended April 04, 2025, making it the most capitalized firm in the consumer goods sector. Bua Foods business model is to manufacture, process and distribute food products within and beyond Nigeria. On March 20, 2025, Bua Foods Plc also reported on the firm compliance with the Nigerian Code of Corporate Governance 2018 in line with the requirement of the Financial Reporting Council of Nigeria. A final dividend of ₦13.00 per ordinary share of 50 kobo each, subject to appropriate withholding tax and approval, was approved and will be paid to shareholders whose names appear in the Register of Members as at the close of business on August 21, 2025. The register of shareholders will be closed from August 22, 2025, to August 29, 2025. The dividend payment date has been slated for September 25, 2025, as the dividend will be paid electronically to qualifying shareholders who have completed their e-dividend registration and mandated the Registrar to pay their dividends directly into their bank accounts. Bua Foods recorded ₦1.528 trillion as revenue from contracts with customers, a 109.5 percent year-on-year increase from the previous year. 95.5 percent of the group revenue is earned from sales in Nigeria, as sugar (non-fortified), pasta, bakery flour, bran and rice recorded above 100 percent increase in revenue. New product lines such as semolina and maize were also recognized in the period. A gross profit margin of 35.40 percent was recorded in 2024 compared to the corresponding 35.71 percent recorded in 2023. The operating profit of 30.90 percent was squeezed by a net finance cost of ₦187.780 billion, of which foreign exchange loss accounts for ₦173.293 billion, this resulted in a PBT margin of 18.61 percent. The PAT margin for the period is 17.51 percent due to a high net off value of ₦65.837 billion arising from the effect of a permanent difference applicable to the statutory tax charge that should have been at ₦85.297 billion. The PAT margin of 17.51 percent recorded in 2024 is 2.04 percent higher than the 15.37 percent recorded in 2023. The basic and diluted EPS for 2024 is ₦14.78, a slight increase of 1.09 percent from ₦14.62 in 2023. There was a 254.32 percent increase in the right-of-use assets driven by a 220.14 percent rise in lease liabilities. There was a 78.49 percent increase in advance payments liabilities related to contracts with customers due to advance customer deposits for goods not yet supplied, arising majorly from two additional production lines commissioned during the year. There was an 87.86 percent decrease in trade receivables and other assets driven by the decline in large cash deposits with banks for foreign currency bids. The financial risk on total borrowings reduced year-on-year by 39.81 percent from ₦651.077 billion in 2023 to ₦391.857 billion in 2024. The trade and other payables increased by 91.77 percent from ₦49.476 billion in 2023 to ₦94.878 billion in 2024, majorly due to unsettled value-added tax payable, which increased by 110.86 percent from ₦38.346 billion in 2023 to ₦80.857 billion in 2024. The outstanding balances with related parties increased by 56.91 percent to ₦547.387 billion due to liabilities settled by Bua International Limited on behalf of Bua Foods Plc. DANGOTE CEMENT Dangote Cement Plc has a market capitalization of ₦8.099 trillion from 16.874 billion issued shares at a closing market price of ₦480 per unit share for the market day ended April 4, 2025, making her the most capitalized firm in the industrial goods sector. Dangote Cement Plc core business is the production and sale of cement within and beyond Nigeria. Her component auditor is KPMG. Dangote Cement Plc notified the exchange of director/insider dealings on March 08, 2025, when Adenike Fajemirokun, the group chief risk officer, purchased 350,000 units; Aliyu Suleiman, the group chief strategy officer, purchased 150,000 units; and Alake Marcus Olakunle, a director, purchased 2,000,000 units of Dangote Cement Plc shares at a unit price of ₦618.10 each on March 7, 2024. Dangote Cement Plc notified the exchange of a $400 million expansion to upscale a second production line at its Mugher cement plant in Ethiopia to double the facility's annual production capacity to five million tonnes, due to be operational within 30 months with a future plan of establishing a new greenfield cement grinding unit with an annual capacity of three million tonnes. A final dividend of ₦30 per share, subject to the appropriate withholding tax and approval, will be paid to shareholders whose names appear in the Register of Members as at close of business on Monday, June 9, 2025. The register of members will be closed on Tuesday, June 10, 2025, and the dividends will be paid electronically to qualifying shareholders who have completed the e-dividend registration and mandated the Registrar to pay their dividends directly into their bank accounts. Dangote Cement Plc has proposed to hold her AGM on Monday, June 23, 2025. Dangote Plc notified the exchange on March 19, 2025, of the appointment of Gbenga Fapohunda as the substantive group financial officer of Dangote Cement Plc effective January 1, 2025. On March 28, 2025, Dangote Cement Plc also reported on the compliance with the Nigerian Code of Corporate Governance 2018 in line with the requirement of the Financial Reporting Council of Nigeria. Dangote Cement Plc recorded revenue of ₦3.581 trillion in 2024, an increase of 62.16 percent from ₦2.208 trillion in 2023. The gross profit margin for 2024 was 54.04 percent, slightly lower than the 54.43 percent recorded in 2023. Haulage expenses were a significant operating expense for the period at a value of ₦535.695 billion with a year-on-year growth of 73.14 percent, or 10.99 percent higher than the corresponding increase in gross revenue. The operating profit margin of 32.18 percent was squeezed by finance costs of ₦700.299 billion made up of interest cost and net foreign exchange loss to deliver a PBT margin of 20.46 percent. ₦448.081 billion was recorded for interest expense in 2024 compared to ₦144.530 billion in 2023, an increase of 210.03 percent, majorly driven by an adjustment to the effective interest rate on funds at 25.8 percent in 2024 compared to 17.3 percent in 2023 on financial instruments measured at amortized costs. The net foreign exchange loss increased by 51.95 percent from ₦164.077 billion in 2023 to ₦249.322 billion in 2024, resulting from the 41.42 percent devaluation of the Nigerian naira against the United States dollar. The net profit margin for 2024 was 14.06 percent, a decline from 20.63 percent recorded in 2023. The basic and diluted EPS for 2024 is ₦29.74, a 51.50 percent reduction from ₦61.32 in 2023. Dangote Cement Plc property, plant and equipment for the group increased year-on-year by 36.50 percent from ₦3.937 trillion to ₦5.375 trillion as a result of ₦413.777 billion attributable to asset additions and ₦1.048 trillion attributable to the effect of foreign currency exchange rate differences. The 69.96 percent increase in inventories is in line with the business operations, as only ₦1.09 billion worth of inventory was written off during the period. The 59.45 percent increase in trade and other receivables is majorly driven by a 71.51 percent increase in other receivables, which consist of a ₦17.1 billion promissory note from export expansion grants and ₦2.5 billion in outstanding withholding tax credit receivables. There was also an increase of ₦757 million in impairment on receivables loss allowance from ₦2.226 billion to ₦2.983 billion. There was a 36.10 percent increase in prepayments, majorly driven by the increase in advances paid to contractors for the construction of plants, purchase of AGO, coal and other materials, dues from the parent company and dues from entities controlled by the payment company. The foreign currency translation reserve presents the results and net investments of the group’s foreign operations from other functional currencies to the group presentation currency. The foreign currency translation reserve is recognised in other comprehensive income and reclassified to profit or loss on the disposal of the foreign operations, recorded an increase of 73.22 percent to ₦1.083 trillion. The 60.04 percent increase in trade and other variables is majorly driven by the 121.85 percent increase in trade payables, resulting in an increase in trade payable days on hand from 67 days in 2023 to 90 days in 2024. The group increased her exposure to loans from Dangote Industries Limited, bank loans, and overdraft balances. The financial liabilities consist of a new facility of $675 million obtained from Afrexim, a grace period of 24 months, of which equal instalments will be paid quarterly from the end of the grace period up to the maturity period of 60 months priced at SOFR + 6.5 percent, and a ₦120.5 billion facility from Dangote Industries Limited to finance working capital priced at 19.5 percent to be repaid in 2025. Dangote Cement Plc advanced the $675 million Afrexim loan to Dangote Industries Limited, a related party, for expenditures on projects in African countries. There are other related party transactions such as sales of goods, purchases of goods, interest on loans granted to subsidiaries, administrative services on which a management fee is charged, materials and services used in subsidiaries manufacturing processes, financial support for capital development and operation and funds assistance. Interest of between 10 percent and 12.5 percent was charged on receivables due from subsidiaries; however, no impairment loss was provided on these receivables. … to be continued