TheCable Ratings: Top 10 earning companies 2016

Rising cost and shrinking profit margins are the general pattern in the corporate earnings field in 2016. Some companies have however found some oasis of strengths that have placed them on the leadership table by earnings per share so far this year. These include industry leaders that are aggressively using leading brands to snatch market shares of weaker companies. This is the case in breweries, food/beverages and cement industries.

Some of the top earning companies also belong to industries where they have captive or underserved markets such as oil palm industry. The dominant members of the top 10 group are petroleum marketers that have suddenly found new strengths in revenue and profit that they have never seen for many years. The banking sector failed to make an entry on the top earnings league at the end of the first quarter.

1. Nestle Nigeria is the number one company by earnings per share so far this year, a position it has held unchallenged for some years. It closed first quarter trading with earnings per share of N8.42 with a full year projection of N35 per share against N29.95 at the end of 2015. The food & beverage company however faces a major challenger this year, as petroleum marketers take on a high growth momentum. Nestle’s strength lies is its sustaining stable growth in revenue from year to year that has enabled it to defend profit.

The company has not been able to push up profit reasonably in the past four years but this year is looking good for an accelerated growth. A solid growth of 31% in sales revenue happened in the first quarter and with a cost cutting success, profit more than doubled year-on-year to stand at N6.68 billion at the end of the first quarter. The company paid out a total cash dividend of N29 per share for 2015 operations, almost everything it earned in the year. Shareholders can hope for an increase at the end of this year with the projected growth in earnings per share.

2. Total Nigeria is bidding seriously for the number one position on the top earnings league this year. The oil marketing major has configured a high growth momentum for 2016, using a long range growth strategy to reclaim the position it used to occupy until the oil market turmoil slowed it down since 2009. The company closed first quarter operations with earnings per share of N8.32 – a high jump from only N1.32 in the first quarter of last year.

Sales revenue isn’t growing for the company though it is promising to pick up but an exceptional rise of over 530% in net profit to N2.82 billion means the company has already earned 70% of its 2015 full year profit in the first quarter. Full year projection indicates the company may get close to tripling the N4.05 billion after tax profit it posted at the end of 2015. With that level of growth rate, it stands a good chance of overtaking Nestle on earnings per share leadership in the course of the year. Total Nigeria earned N11.92 per share at the end of 2015 and paid out a cash dividend of N14 per share. The exceptional growth in earnings per share anticipated is also promising a big harvest for investors at the end of this year.

3. Mobil Oil Nigeria is the 3rd highest company by earnings per share at the end of the first quarter. It closed the period with earnings per share of N5.04, improving from N4.13 per share in the same period last year. The company is growing sales revenue this year after a sharp fall to a four-year low last year. It retains its leadership of the petroleum marketing group by profit margin – which towers above others at 8% at the end of the first quarter. The company is expected to lift profit to a new peak this year after a drop last year with earnings per share likely to stand at over N21 at full year – close to 60% increase from the N13.51 kobo the company reported in 2015. It paid a cash dividend of N7.20 per share for its 2015 operations.

4. Dangote Cement comes on the 4th position among the top 10 earning companies so far in 2016. The cement manufacturer reported earnings per share of N3.12 at the end of the first quarter, which is a drop from N4.09 the company earned in the same period last year. The company is growing sales revenue at a comfortable margin of 24.5% year-on-year at the end of March but profit dropped by about the same margin at 23% over the same period. Profit growth is expected to pick up in the course of the year and the company is expected to improve earnings per share from N10.86 at the end of 2015 to N12.49 in 2016. It paid a cash dividend of N8 per share for last year’s operations.

5. Flour Mills of Nigeria comes next on the 5th spot with earnings per share of N7.01 at the end of its three quarters running up to the end of December. This works out to an average earnings per share of N2.34 for each quarter. The company is uplifted by a windfall that happened earlier in its financial year but it is nevertheless facing operating pressures big enough to have caused a loss in the third quarter – which lowered net profit from over N24 billion in the second quarter to N19 billion. The full year position is uncertain, as a further drop in profit cannot be ruled out. The company earned N3.44 per share in the preceding financial year and paid no dividends for the year.

6. Okomu Oil Palm, from the agricultural sector, ranks 6th on the table with earnings per share of N1.67 at the end of the first quarter. The company achieved an impressive growth of 37% in sales revenue in the first quarter and profit rose by over 55% to N1.6 billion during the same period. It is driving high growth for the second year after doubling profit in 2015. Earnings growth is however likely to slow down in the second half, which is the off season for palm produce. Nevertheless a strong growth in profit is still expected at full year with earnings per share projected at N4.62 at the end of 2016. This means the company may slip from its current position with the expected slowdown in the second half. It earned N2.36 per share in 2015 and paid a dividend of 10 kobo per share.

7. MRS Oil, the third petroleum marketer on the top earnings league, follows on the 7th position with earnings per share of N1.43 at the end of the first quarter. The difference the company has made on the earnings table this year has come from just one favourable change on the cost structure. Finance cost of about N1.4 billion, which caused a loss in the first quarter of last year, has thinned down to just a little over N167 million this year. This has shifted the company’s position from a loss of nearly one billion naira in the same period last year to a net profit of N363 million at the end of the first quarter. This promises a big leap in profit at full year and a projected earnings per share of N6.19. The company earned N3.68 per share at the end of 2015 and paid a cash dividend of N1.10 per share for the year.

8. Nigerian Breweries takes the 8th position on the top 10 earning companies in 2016 with earnings per share of N1.32 at the end of the first quarter. This isn’t much of an improvement from N1.27 in the same period last year, as profit growth remains static for the company in a generally declining industry. The ability to keep sales up comes from its market leading products and a lot of economies of scale advantage built up in recent years are helping the company to defend profit margin. A moderate growth in profit is expected for the company at full year and earnings per share is projected at N5.36 for the year. The company earned N4.82 per share in 2015 and gave shareholders a cash dividend of N3.60 per share.

9. Presco, the second oil palm producer on the ranking, takes the 9th position on the table with earnings per share of N1.40 at the end of the first quarter. This is a flat position on the N1.39 per share the company earned in the same period last year. A sharp drop in gain on changes in fair value of biological assets countered improvements in revenue lines that led to over 143% jump in pre-tax profit. Profit growth is expected to accelerate in the course of the year and earnings per share is projected at N4.12 at the end of 2016. The company earned N2.32 per share in 2015 and no dividend has yet been announced at press time.

10. 7-up Bottling Company closes the top 10 earnings table with earnings per share of N3.48 for three quarters of its financial year. A tight market isn’t letting the soft drinks company to grow sales and turnover is expected to close flat at full year. Rising input cost and interest expenses have undermined profit capacity to the extent of a 50% drop in after tax profit year-on-year at the end of the third quarter. Earnings per share is projected at N4.83 per share for the company at full year, a likely drop from N11.12 per share in the preceding financial year. It paid a cash dividend of N2.90 per for the preceding year’s operation.