FX losses impact earnings of cement makers, telcos

Nigeria’s cement manufacturers and telecom companies have recently released their full-year 2023 earnings, revealing a mixed bag of results due to foreign exchange losses and higher net interest income. The impact of the fluctuating naira, unification of exchange rate windows, and a weaker naira has taken a toll on the profitability of companies such as BUA Cement, Dangote Cement, Lafarge African, and MTN Nigeria. Ekene Oyeka, a Securities Trader at Norrenberger, shed light on the financial highlights of these companies in a recent interview with CNBC Africa. Dangote Cement experienced foreign exchange losses over the past year, affecting its revenues. However, the company showed strength in its financials with an increase in revenues by 36.44% and growth in operating profits and margins. Despite the challenges posed by FX losses, currency unification, and inflation rates, Dangote Cement managed to focus on local production rather than relying heavily on foreign exchange, which contributed to its resilience. Similarly, BUA Cement also faced adverse market conditions but managed to increase its top line by 6.8% and improve its operating margins. This indicates the fundamental strength of these companies, showcasing their ability to weather economic uncertainties and maintain stable financial performance. Investors were taken aback by the unexpected losses incurred by these industries, leading to a shift from the capital market to the fixed income market. The attractiveness of fixed income instruments, coupled with the perceived undervaluation of stocks, prompted investors to reassess their portfolio strategies and consider re-entering the market. Oyeka emphasized the potential for a recovery period for the companies, especially in the telecommunications sector where data consumption has seen significant growth. By focusing on increasing data revenues and enhancing operational efficiency, telecom companies like Airtel and MTN can drive profitability and bolster their balance sheets. Despite the challenges faced by the cement and telecom sectors in Nigeria, Oyeka highlighted the resilience of these companies and the opportunities for investors to capitalize on favorable market conditions. The restructuring of operational policies, emphasis on local production, and strategic investments in data services present avenues for growth and recovery in the coming years. In conclusion, the financial performance of cement makers and telcos in Nigeria reflects the broader economic landscape marked by currency fluctuations and regulatory changes. As companies navigate these challenges, prudent management strategies, innovation, and a focus on core business operations will be crucial in sustaining growth and profitability amidst a volatile market environment.