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JULIUS BERGER NIGERIA PLC FY'22 - Capital projects offsets weak private sector revenue

Margins remain weak in Q4’22 In Q4’22, revenue rebounded from a weaker Q3’22 earnings, boosted by increased capital projects and government funded contracts during the financial year. As a result, revenue came in 52% higher y/y at ₦130.6 billion. Meanwhile, JBERGER continued to struggle with the effect of unabating FX challenges on input cost and building materials, reporting 68% y/y increase in cost of sales. As such, gross margin declined by 8ppts to 14%, with gross profit contracting by 3% y/y to ₦18.4 billion.

Interest rate hike quells real estate growth For FY’22, revenue increased by 30% y/y to ₦440.4 billion. This was driven by an increase in pre-election capex spend, which drove revenue from civil works (accounts for 83% of total revenue) higher by 84% y/y. On the flip side, revenue from the private segment declined by 46% y/y, which can be attributed to the rising interest rates that curtailed investments in the real estate sector.

Revenue growth to taper slightly in H1’23 Although we expect earnings to wane slightly in H1’23 due to the uncertain political climate, our outlook for Julius Berger remains strong, as we expect improved performance in H2’23 due to resumption of infrastructure projects by the FGN. On the other hand, we foresee slower growth in the private segment, as we expect high interest rates to limit investments in real estate activities.