Q3-2020 Earnings: Reflecting The State Of The Economy?

The market has been awash with Q3-2020 corporate earnings. Some of the notable results submitted included WAPCO, AIRTELAFRICA, Stanbic, UCAP, Flour Mills and much recently, MTN Nigeria, all published strong growth numbers.

By sector, the performance of FLOUR MILLS and NASCON showed that favourable government policy for Agro-allied and Food Processors, especially the closure of the border, supported volume growth amid lockdown induced pent-up demand that was met in Q3.

Q3-2020 corporate earnings

WAPCO’s performance also indicated increased cement consumption with profitability further supported by lower finance charges. For the Telco’s, increased data, digital and Fintech/payment revenue continued to drive growth, as observed in the numbers for MTNN and AIRTELAFRICA.

Finally, STANBIC and UCAP’s performance reflects resilience in the financial services sector, with asset management fees, other non-interest income and low cost of fund buoying profitability.

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While we expect GDP growth in Q3-2020 to remain negative, as observed in Q2-2020, negative growth in Q3-2020 is likely to improve significantly, going by corporate earnings above, compared to the -6.1% contraction observed in Q2-2020. We imagine that the full re-opening of the economy and low interest-rate environment will support the performance of food processors, Agro-allied and industrial businesses.

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Q3-2020 Earnings Reflecting the state of the economy Brandspurng
CMS, Lagos, Nigeria | The golden hour on an evening on the bridge leading to Marina Lagos. | Photo by Obinna Okerekeocha
The Banks are expected to stay resilient, supported by the low cost of fund and non-interest income. Meanwhile, growth in the Telecom space is expected to be sustained in the realities of COVID-19. Nevertheless, activities in the Trade, Real Estate/Hospitality and the larger informal sector are projected to remain significantly subdued worsened by the unrest across the country.

United Capital Plc Research