Logistics sector sustains sliding financial performance

The logistics industry, like any of its peers is faced with various challenges ranging from high interest rates and naira devaluation.
Indeed, poor transportation infrastructure is considered to be the most significant challenge facing logistics provider, which must be addressed if further business opportunities would be unlocked in the industry.

The above factors has been listed as the major ills militating against the growth of the industry, just as the sector has witnessed sustained sliding profile in the last few years.

For instance, Trans-Nationwide Express Plc (Tranex), a Logistics Company engaged in domestic and International Express delivery, haulage, freight and other ancillary transportation and storage services, ended full year 2014 with net earnings drop of 14 per cent to N66.771 million from N77.432 million recorded the previous year.

Specifically, the company’s pre-tax profit dropped by 32 per cent from N72.665 million during the previous year to N49.476 million during the period under review.

The company’s revenue declined by 0.15 per cent from N716.915 million in 2013 to N718.016 million during the full year 2014.Also, the firm ended 2015 financial year in the negative with full year profit after tax shedding 24 per cent to N50.972 million from N66.771 million recorded a year earlier.

However, the company’s pre-tax profit grew by 53 per cent from N49.476 million during the previous year to N75.678 million during the period under review.

The company’s revenue also grew by 11 per cent from N718.016 million in 2014 to N798.557 million during the financial year 2015.The directors of the company proposed a dividend of 10 kobo per share to its shareholders which amounts to N19, 882,000.

However, investors got respite at the first quarter of 2016, following impressive results reported by the company. Tranex grew profit after tax by 37.98 per cent to N17.701 million from N12.828 million recorded a year earlier for the Q1 2016 ended March 2016.The company’s pre-tax profit grew by 43.81 per cent from N16.828 million during the previous year to N24.201 million during the period under review.

Furthermore, its revenue also grew by 11 per cent from N718.016 million in 2015 to N798.557 million during the financial year 2016.
But expectations that the impressive first quarter results would be sustained was dashed, as H1 2016 profit after tax declined marginally by 1.95 per cent to N29.040 million from N28.484million recorded a year earlier.In a filing from the Nigerian Stock Exchange (NSE) the company’s pre-tax profit also dropped by 1.86 per cent from N37.984 million during the previous year to N38.690 million during the period under review.

However, the company’s revenue grew by 9.97 per cent from N383.636 million in 2015 to N7421.899 million during the half financial year 2016.Trans-Nationwide Express Plc (Tranex) Q3 2016 profit after tax declined by 24.41 per cent to N35.151 million for the period ended September 30, 2016 from N28.484million recorded a year earlier.

The company’s pre-tax profit also dropped by 23.53 per cent from N61.007 million during the previous year to N46.651 million during the period under review.However, the company’s revenue grew by 2.28 per cent from N589.144 million in 2015 to N602.625 million during the half financial year 2016.

Similarly, another indigenous logistics firm, Red Star Express Plc was not insulated from the harsh operating environment as the bottom-line of the listed equities, especially in the last financial year have remained susceptible to the challenges facing the sector, as it posting 18.67 per cent decrease in profit after tax for the third quarter ended December, 2015.

The company’s profit after tax dropped from N309.091 million the previous year to N251.353 million during the period under review representing a drop in 18.67 per cent. However, the company’s turnover dropped marginally by 0.02 per cent to N4.999 billion from N5.000 billion the previous year.

The company began the financial year with a 2.91 per cent in pre-tax profit during the first quarter ended June 30, 2015. Red Star posted a profit before tax of N128.667 million for the first quarter ended June 30, 2015 as against N125.027 million accounting for an increase of 2.91 per cent. Profit after tax equally grew by 2.91 per cent from N87.519 million in contrast to N90.067 million recorded during the comparable period of 2015.

Turnover also grew by 5.52 per cent from N1.586 billion in 2014 to N1.674 billion during the period under review. It posted 24.26 per cent drop in net earnings as the harsh operating environment continues to hit courier services sector in the country.

Further review of the firms performance, showed that the group recorded profit after tax of N157.000 million for the second quarter ended September 31, 2015 as against N207.287 million posted during the correspondent period of 2014, representing a decrease of 24.26 per cent. Profit after tax stood at N224.286 million during the period under review from N297.041 million reported in 2014.

However, the company recorded revenue of N3.357 billion during the year under review in contrast to N3.308 billion recorded in 2014, accounting for an increase of 1.48 per cent.

The Managing Director of the company, Sola Obabori explained that the industry is a reflection of total state of the economy.“ If the economy does very well, it will also benefit from it. If the power sector runs very well, what will happen? Of course, production will improve substantially. To us, there will be more goods to deliver from one location to another.

“The industry is not operating in isolation if the rest of the economy; we are part of it. We oil the machine of distribution from the point of production to the level of consumption. That is our job; intermediaries from the time the raw materials are sourced to the end production.
   
“As the middlemen, whatever happens at the two ends, we will take a share of it, whether they do well or not, the impacts rest with us. To a large extent, the industry needs re-organisation, but it does not imply we are no contributing to the economy. I cannot boast that we have done better; we are reflecting the state of the economy in larger scale.” He added.

An independent investor, Amaechi Egbu said the inability of the privatised power sector to increase output as envisaged, as a result of issues with gas supply and power distribution, rising inflation cost and decaying infrastructure continue to pose great challenges to businesses in the country resulting in maintenance and operations cost.

He also added that significant drop in government revenue and distortion in foreign exchange market led to the depreciation of the Naira in the period under review. This according to him resulted in higher cost for all the company’s international operations.

Analysts, while assessing the activities of the sector expressed worry over the difficult operating environment, noting that the economic and business environment continues to be challenging for most companies, including Tranex.

According to them, typically, businesses like this are the barometer for predicting economic growth in the west, as the performance of delivery businesses is an indication of how economic activities are performing in terms of the sale of goods and services.

They noted that it is not so in Nigeria because the room for growth in delivery business is hinged on huge infrastructural development such as roads, safer airspace.They also opined that the increasing rate of insecurity in various parts of the country, which is one of the sector’s high revenue generating territories, slightly impacted on its business.