Geregu Power tops up profit to N11bn in Q3, may beat full year target

Geregu Power Plc earned roughly N4 billion profit in the third quarter (Q3), topping up to N11.3 billion for the nine months of operations.

The profit for Q3 is ahead of the forecast of N3.7 billion for the quarter, indicating that the full-year profit target of slightly below N15 billion may be exceeded.

The final quarter is forecast to add N3.1 billion to the bottom line – which looks quite good as well to be surpassed.

The interim financial report of the power generating company for the third quarter ended September 2023, affirms the sustenance of operations on the growth track for the second quarter (Q2) running after fixing its primary gas supplies problem.

Sales revenue and profit accelerated in Q3 after rebounding in Q2 from the first quarter (Q1) drops.

Turnover jumped close to five times in Q3 to N21 billion compared to 34 percent growth in Q2. The figure is about N6 billion better than the N15.1 billion sales revenue forecast for Q3.

After-tax profit similarly advanced from a 25 percent increase in Q2 to a three-and-half times jump to almost N4 billion in Q3.

Last year, the third quarter marked the beginning of the company’s loss of earnings which ended in a drop of 50.5 percent in after-tax profit to N10.2 billion for the year. This year, it is providing the biggest upturn in revenue and profit as well.

The upturn in the company’s earnings performance is expected to be maintained in the final quarter, during which projected sales revenue of N17.9 billion looks quite likely to be exceeded.

Geregu Power’s earnings numbers add up to N55.7 billion turnover at the end of Q3, just N12 billion to hit the N67.7 billion sales revenue the company expects at full year.

The company had suffered a drop of 32.9 percent in turnover to N47.6 billion in 2022.

Its two income lines — energy sold and capacity charge — both contributed to the improved revenue performance in Q3 at much accelerated growths of 300 percent to N13.1 billion and 315.8 percent to N7.9 billion, respectively.

At N55.7 billion, the company’s closing sales revenue at the end of Q3 represents an increase of 42.9 percent year-on-year, a considerable improvement from a marginal increase of 2.6 percent at half-year.

Production cost grew significantly below sales revenue at an increase of 33.9 percent to N26.9 billion.

The cost saving from production cost powered an increase of 52.5 percent in gross profit to N28.9 billion — a big leap forward from an increase of about 8 percent in gross profit at half-year.

Two major rising costs continued on the upsurge in Q3 — impairment loss on financial assets and administrative expenses — which multiplied more than 19 times year-on-year to N3.1 billion and more than doubled at 112.2 percent to N5.9 billion, respectively, over the period.

With the cost incursion, operating profit grew at a slower pace than gross profit at 24 percent to N19.9 billion at the end of the third quarter. That still makes a much-improved record compared to a decline of 5 percent in operating profit to N13.8 billion at the end of half-year operations.

Further pressure on the side of cost came from finance expenses that more than doubled at 109 percent to N8.5 billion, but this was countered by finance income that jumped close to three times to over N6 billion at the end of Q3.

Net finance cost, therefore, amounted to N2.4 billion, which is a moderated increase of 15.9 percent at the end of the period.

Pre-tax profit grew by 25.3 percent to N17.5 billion — an upturn from a drop of 8.8 percent to N12.3 billion at half-year. After-tax profit went up by 13.3 percent over the period to N11.4 billion, reversing from a drop of 11.5 percent to N8 billion at half-year.

The expected positive growth in earnings in the second half is being realised, which raises the hopes for the energy company possibly closing the year ahead of the earnings target.