Report

JULIUS BERGER NIGERIA PLC Q1'24 Earnings Release - FX gains bolsters bottom-line

"Private sector demand defies macro environment
Julius Berger’s Q1 results showed a marginal increase in topline, buoyed by upbeat construction activities. Breaking it down by segments, revenue from the Government declined by 3% y/y to ₦94 billion. We attribute this to a possible slowdown in Capex rollout by the Government. However, interestingly, despite the biting impact of the inflationary pressures on consumers’ income, revenue from the private sector increased by 62% y/y to ₦16.7 billion, bolstering total revenue by 3% y/y to ₦110.8 billion. 
On the cost front, cost of sales increased by 2% y/y to ₦89.9 billion, bringing gross margin to 19% (Q1’23: 19%), with gross profit increasing by 5% y/y to ₦20.9 billion."                    
"Management's focus on cost control yields positive outcomes
Compared to previous quarters where operating expenses had ballooned, it was a different turnout for Q1’24. The company’s OPEX only saw a 6% y/y increase to ₦15.5 billion, showing signs that management’s efforts is yielding results. In light of this, we saw operating margins soar by 9ppts to 14% (Q1’23: 5%).
Meanwhile, JBERGER recorded a 20x jump in foreign exchange gains to ₦9.4 billion. The cumulative impact of this surge alongside the improved operating margins (Q1’24: 14%; Q1’23:5%) drove a 160% y/y jump in EBIT to ₦15.2 billion."                    
"Inflation & heavy rainfall put brakes on growth
In the coming quarter, we expect construction activities from the public and private sectors to slow down due to the commencement of the rainy season. On the flip side, we expect JBERGER to sustain its cost control measures, amidst the rising inflationary pressures and FX fluctuation. Overall, we expect Q2’24 performance to come in weaker, compared to Q1’24, given the expected downturn in construction activities.
For the full year however, we forecast a revenue growth of 15% y/y to ₦513.7 billion, and a PAT growth of 39% to ₦17.8 billion. Finally, we estimate a target price of ₦68.13 and place a SELL recommendation on the stock."                    

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Vetiva Capital Management
Vetiva Capital Management

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Analysts
Abigail Alabi

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