Market sheds N393bn as weak earnings keep investors away

25 July 2016, Lagos – The Nigerian equities market declined for the fourth consecutive week as weak second quarter (Q2) corporate earnings,  news of profit warning and  notification of   late filings of results combined to further dampened investors’ sentiments.


Nigerian Stock Exchange

After falling by 0.17 per cent the previous week, it was expected that Q2 corporate numbers will lift the market last week. However, that was not to be as most of the companies turned in weak performances.

Unilever Nigeria Plc, Cadbury Nigeria Plc and Courtville Business Solutions Plc recorded decline in Q2 bottom-lines, while Lafarge Africa Plc ended the period with a loss. In reaction to this development, most investors stayed away from the market. Consequently, the   Nigerian Stock Exchange (NSE) benchmark index, the All-Share Index (ASI) fell by 3.98 per cent to close at  27,659.44, while market capitalisation shed N393 billion to be at N9.5 trillion.

Similarly, all the sectors closed lower except the NSE Consumer Goods index, which appreciated 0.9 per cent on the account of gains recorded by Nigerian Breweries Plc. But the NSE Banking index led others, falling by 7.3 per cent, followed by the NSE Industrial Goods Index   that depreciated by 7.1 per cent. The NSE Insurance and NSE Oil & Gas Indices went down by 3.1 per cent  and 0.9 per cent  respectively.

Daily   Performance Summary

The market resumed on Monday on bearish note with the NSE ASI depreciating   by 0.25 per cent to close at 28,733.90 points, compared with the gain of 0.36 per cent on Friday. The depreciation recorded in the share prices of Lafarge Africa, Oando Plc, Ecobank Transnational Incorporated, Cadbury Nigeria Plc and FBN Holdings were mainly responsible for the decrease recorded in the index. Similarly, the market capitalisation depreciated by 0.25 per cent to close at N9.87 trillion.

On Monday, Oando Plc sent a profit warning to the market, saying it would record lower earnings for the  Q2  ended June 30, 2016. According to the company,  the lower earnings  would result from the  impact of the Naira devaluation by the Central Bank of Nigeria (CBN)  that is expected to  amount to an unrealised foreign exchange loss arising from United States dollars (USD) denominated liabilities, outstanding bank trade facilities as well as vendor payables.

“As at the time of the devaluation the company had USD denominated borrowings of $260 million in our Naira dominated earnings businesses, consisting of ~$68 Million in core loans, $89 million in bank trade facilities, $83 Million in asset financing and $21 million in other payables. A   40 per cent devaluation in the value of the Naira against the US dollar from the bank rate of N199.00:$1.00 to N280.00:$1.00, has effectively resulted in these significant foreign exchange losses which we have prudently booked into our financial statements,” Oando said.

The  bearish sentiments were sustained on Tuesday as the NSE ASI  declined by 0.9 per cent to  close at 28,488.56 points whilst market capitalisation contracted by N84.2 billion  to settle at N9.7 trillion.  The market   was dragged by further selloffs in Guaranty Trust Bank (-4.0 per cent), Lafarge Africa Plc (-3.0 per cent), ETI (-5.1 per cent) and Zenith Bank (-1.7 per cent) likely due to recent notifications of late filling of Q2:2016 results.

The market   declined further on Wednesday, falling by 0.94 per cent to be at 28,221.18 points. Market capitalisation shed N91.8 billion to be at N9.7 trillion. The bears were attracted by Dangote Cement Plc(-1.3 per cent), Zenith Bank Plc  (-4.0 per cent) and Oando Plc (-9.6 per cent). Market activity revved up  as volume and value traded appreciated 28.0 per cent and 33.4 per cent to close at 309.7 million  units and N2.1 billion respectively.

Similarly, trading on Thursday remained bearish, leading to a decline of 0.79 per cent to close at 27,997.29. The depreciation recorded in the share prices of Zenith Bank, GTBank, Nestle, FBN Holdings and Guinness were mainly responsible for the loss recorded in the index.  The total value of stocks traded was N1.80 billion, down by 13.53 per cent from N2.08 billion recorded the previous day.

On Friday, which was the last day of the week, the market shed 1.21 per cent to close at  27,659.44 points. The depreciation recorded in the share prices of Access Bank, Dangote Cement, Flour Mills of Nigeria Plc, FBN Holdings and Stanbic IBTC were mainly responsible for the decline.



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