. NGX sustains sliding profile as capitalisation dips further by N671b
Prolonged inflation and devaluation of naira have continued to shrink the earnings of listed firms with significant foreign exchange (FX) exposure, especially those in the manufacturing sector causing the share price of companies under the sector to lose over 20 per cent of their profit in nine months.
Indeed, the sector is faced with myriads of problems ranging from scarcity of FX, high interest rate and cost of raw materials, coupled with unfavourable policies as the return on investment of these listed equities remains subdued by the harsh operating environment.
Regrettably, the sector, which is expected to drive the nation’s economy, is currently grappling with a continuous decline in sales, revenue and profit, causing huge job losses as operators cut back on hiring new employees and purchase of new equipment.
Also, research and development that would promote business expansion and roll-out of new products has been threatened.
Even the share prices of firms considered manufacturing giants and hitherto assumed to be immune to the vagaries of harsh operating environments are currently struggling to survive.
A cursory look at the share price of five listed firms showed that these share prices have recorded consistent losses year to date, majorly due to the lingering FX crisis which has negatively impacted the bottom line and demands for the stocks.
For instance, National Salt Company of Nigeria (NASCON) is the 40th most valuable stock on the NGX with a market capitalization of NGN 83.5 billion, began the year with a share price of 53.75 but has since lost 42.5 per cent off that price valuation, to close at N30.90 kobo yesterday.
Dangote Sugar depreciated by 43 per cent YTD, from N57 at which it resumed transactions for the year to N32.50 kobo posted at the close of trading yesterday. The firm’s market capitalisation is currently put at N 395 billion.
PZ closed yesterday’s trading at N19.50 per share, depreciating by 27 per cent from N26.70 kobo at which it reopened for transaction at the beginning of the year. It ranks 144th on the NGX in terms of year-to-date performance with market capitalisation of N77.4 billion.
Champion Breweries began the year with a share price of N4.15 but has since lost 25.1 per cent off that price valuation to close at N3.11 kobo, ranking it 140th on the NGX in terms of year-to-date performance with market capitalisation of N27.8 billion.
Recall that inflation had moved from 28.92 per cent as at December 2023 to 32.15 per cent as of August. Also, the Central Bank of Nigeria (CBN) Monetary Policy Committee further raised interest rate by 50 basis points to 27.25 per cent last week.
At the end of 2024 half-year operations, five listed firms: Nigerian Breweries, Cadbury l, Nestle, Dangote cement and MTN Nigeria incurred FX losses to the tune of N723 billion.
A member of the Exceptional Shareholders Association of Nigeria, Olugbosun Ariyo, said Nigerian investors have suffered severe hardship due to inflation, currency devaluation, and uncertainty that have continued to erode their investment returns and dividend payout.
According to him, the rising cost of doing business and insufficient infrastructure is currently stifling growth potential for companies listed on the exchange.
He stressed the need for the government to create reforms that will provide an enabling environment for both local and foreign investments.
Additionally, he noted that tackling inflation and currency stability would go a long way in reviving these firms, restoring confidence and driving sustainable growth of the market.
MEANWHILE, the Nigerian Exchange Limited (NGX) closed the second trading session of October on a negative note, shedding N671 billion, amid continued portfolio rebalancing by investors.
Yesterday, the All-Share Index (ASI) lost 1,167.97 points, representing a decline of 1.19 per cent to close at 97,064.42 points. Also, market capitalisation declined by N671 billion to close at N55.777 trillion.
The downturn was driven by price depreciation in large and medium capitalised stocks amongst which are Dangote Cement, Dangote Sugar Refinery, FBN Holdings (FBNH), CWG and Africa Prudential.
On market outlook, analysts at SCM Capital, said:” The market direction will be dictated by the outcome of the MPC meeting and the double auction at the fixed income market.”
Investor sentiment, as measured by market breadth closed negative as 23 stocks advanced, while 28 declined. Seplat Energy emerged as the highest price gainer of 10 per cent to close at N4, 513.40. Livestock Feeds followed with a gain of 9.93 per cent to close at N2.99 kobo, while Regency Alliance Insurance rose by 9.76 per cent to close at 90 kobo.
Caverton Offshore Support Group increased by 9.63 per cent to close at N2.39 kobo while AXA Mansard Insurance up by 7.82 per cent to close at N5.93 kobo.
On the other side, Dangote Cement and McNichols led the losers’ chart with 10 per cent each to close at N478.80 kobo and N1.35 kobo respectively, while Secure Electronic Technology followed with a decline of 7.58 per cent to close at 61 kobo.
UPDC Real Estate Investment Trust depreciated by 4.72 per cent to close at N5.05 kobo, while CWG down by 4.62 per cent to close at N6.20 kobo.
The total volume of trades increased by 80.5 per cent to 268.394 million units, valued at N6.759 billion, and exchanged in 8,565 deals. Transactions in the shares of United Bank for Africa (UBA) led the activity with 37.091 million shares worth N994.000 million.
