FX gains, investment income spur Julius Berger to N12.7bn profit in 2023

Julius Berger Nigeria Plc rode on the back of huge foreign exchange (FX) gains and much-enhanced investment income to avert a profit drop and elevated the bottom line to N12.7 billion at the end of the 2023 trading.

Net FX gain of N11.6 billion rolled in within the year and investment income multiplied six times to N7.2 billion — which changed the course of the company’s earnings story from a drop in gross profit and flat operating profit to a 61 percent rise in after-tax profit.

The full-year unaudited financial report of the construction company as at December 2023, shows considerable operating pressure that halted turnover growth but expanded costs.

However, with the exchange gains and investment earnings, the company turned around from a profit decline in 2022 to a better-than-expected profit improvement in 2023.

The company’s turnover closed flat at an increase of N5.2 billion to N446.1 billion at full-year, but input cost rose by N7.1 billion to N373.5 billion at the end of the year. This is down from the preceding year when turnover grew by 30.2 percent to almost N441 billion.

The cost-income imbalance resulted in a decline in gross profit from N74.6 billion in 2022 to N72.7 billion in 2023.

All other costs were equally on the rise in the year, led by marketing expenses that soared from less than N180 million to over N1 billion over the period.

This was followed by an increase of about 52 percent in net impairment on trade and tax receivables to almost N6 billion. Cost of FX acquisition grew by a third to N6.2 billion and administrative expenses rose by 15.4 percent to N56.3 billion.

The FX gains provided the saving grace for the company by propelling a windfall of N15.7 billion in other gains — more than 10 times the N1.5 billion recorded in 2022.

This is a level-one intervention in the company’s earnings story that absorbed the cost increases and changed the flow from the decline in gross profit to flat operating profit.

Operating profit inched up from N18.6 billion in 2022 to N18.9 billion at the end of the 2023 operations.

Level-two intervention is the inflow of N7.2 billion in investment earnings, six times the N1.2 billion the company reported for its 2022 operations.

The impact of the inflow of investment income is reinforced by a drop in finance costs from N4.3 billion to N3.8 billion over the period.

The development again changed the company’s earnings story from flat operating profit to a leap of 43.9 percent in pre-tax profit from N15.5 billion in 2022 to N22.3 billion at the end of the 2023 financial year.

Profit growth accelerated from the 2022 performance when pre-tax profit grew by 9.6 percent to N15.5 billion.

After-tax profit is much elevated from a decline of 5.2 percent to N7.9 billion in 2022 to a jump of 61 percent to N12.7 billion at the end of 2023.