Transcorp Turns Profitable As Foreign Exchange Loss Eases

(Sundiata Finance) – Transnational Corporation of Nigeria (Transcorp) Plc has reported a better-than-expected result as it returned to profitability on the back of reduced foreign exchange loss on borrowings. For first six months through June 2017, the company whose interest spans hotel, agriculture, and oil and gas, recorded a profit after tax of N4.16 billion from a loss position of N12.19 billion as at June 2016. 7 out of 13 analysts surveyed by BusinessDay had forecast PAT of N3.15 billion. Sales were up 37.94 percent to N34.17 billion in June 2017 from N24.78 billion the previous year, driven by increase in capacity charge and energy sent out. The company expanded capacity by 66.67 percent and improved energy sent out by 61.63 percent within the period. The growth in profit was underpinned by 93.45 percent drop in foreign exchange loss on financial activities to N721.70 million in the period under review from N13.25 billion the previous year. Transcorp had incurred huge unrealized foreign exchange loss in previous quarters due to the impact of the material devaluation of the Naira against the United States Dollars on a dollar acquisition facility of its power facilities. The local currency lost 40 percent of its value against the U.S currency when the central bank adopted a flexible exchange rate system in June of 2016. Transcorp’s strong earnings translated into strong margins amid a volatile and tough operating environment. Net margins, a measure of profitability and efficiency increased to 12.17 percent in June 2017 from -49.21 percent as at June 2016. Earnings before interest and tax (EBIT) margin rose to 27.86 percent in June 2017, as against 24.42 percent the previous year. In November 2013, Transcorp won the bid for Nigeria’s $300 million gas-fired Ughelli Power Plant, an investment which came as part of the $2.5 billion energy infrastructure commitment to the United States Power Africa Initiative by the group. “When Transcorp took ownership of the 1000MW capacity plant on 1st November 2013, our mission was to take it from generating only 160MW of power daily, back to producing at its full 972MW capacity,” the company said in a recent note to BusinessDay. “Today, Transcorp Power has increased its available capacity by 525% about (620MW), and has the long term goal of being responsible for at least 25% of all the power generated within the country,” the company added. Transcorp has a total debt long term debt of N106.60 billion in its balance sheet, which is 6.73 percent higher than the N98.94 billion figure it recorded the previous year. Despite money borrowed from bank to finance its expansion plans, the company’s ability to pay interest from earnings is not questionable as its times interest coverage of 2.02 times earnings are above the global average of 1.50 times. Transcorp had a total asset of N264.30 billion as June 2017 while shareholders fund stood at N92.66 billion in the period under review. The company’s shares gained 8.05 percent to close at N1.61 on the NSE on Monday, valuing it at N65.45 billion. “There is room for improvement in Nigeria’s power generation and that is exactly why our vision is geared towards achieving that,” the company summed.

(Source: BusinessDay)

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