Corporate results released by listed companies indicate strong growth and recovery for companies that experienced declines in their financials in 2004 such as Unilever.
Nonetheless, the results of some companies [such as Produce Buying Company and Camelot] were unimpressive.
Consequently, although aggregate topline advanced by 15% [from ?8.7 trillion in 2004 to ?10 trillion in 2005], aggregate after tax earnings for listed companies edged down by 6% from ?960 billion to ?901 billion during the period.
Standard Chartered Bank increased its capital during the first quarter by issuing Preference Shares while a pharmaceutical company, Ayrton Drugs plans to float shares to the public. It has just received approval from the Securities and Exchange Commission. The Agro-processing industry, represented by Benso Oil Palm Plantation and Golden Web, was one of the industries that recorded unimpressive financial results during the period. The industry?s aggregate turnover declined by 11% from a level of ?88 billion in 2004 to ?79 billion in 2005 while net earnings fell by 144% from ?5.4 billion in the preceding period to a loss of ?2.4 billion in 2005. The industry placed 11th out of a ranking of eleven industries by turnover, while taking the 10th position by net earnings.
A quarterly review of corporate performance by Doris Yaa Aggrey of Databank Financial Services indicate that competition in the banking sector for market share in the industry represented on the Ghana Stock Exchange continued aggressively. The industry saw its aggregate net interest income advance by 16% from ?1.4 trillion in 2004 to ?1.7 trillion in 2005, while aggregate earnings after tax retreated by 14% [from ?655 billion in 2004 to ?566 billion]. The Banking Industry witnessed general declines in margins as a result of the recent downward trend in the rates quoted for gilt edged bills as well as intense competition.
Guinness Ghana Brewery Limited reported remarkable growth rates in their topline and bottom-line, arising from its merger as well as from its aggressive marketing strategy. The brewery industry placed third in the ranking both by turnover and by after tax earnings.
GGBL?s contribution to the industry?s sterling performance was outstanding. ABL, the other member of the industry seems to be struggling with its operations and reported a loss for its most recent nine-month ended December 2005. Brewery Industry turnover advanced by 41% from ?711 billion to ?1 trillion while net after tax earnings jumped by 58% from ?77 billion to ?122 billion.
According to Ms Aggrey, the consumer goods industry, which experienced declines in turnover and after tax profit due to influx of cheap imported and smuggled substitutes in 2004, recovered remarkably in 2005. Strategies adopted by industry members to withstand the competition included cost efficiency techniques and concentration on core business operations where they have relative cost advantage. The consumer goods industry was ranked 6th by turnover and 5th by after tax profits. A growth of 15% in topline was recorded from ?1.1 trillion to ?1.3 trillion while after tax profit improved by 27% from ?77 billion to ?97 billion.
The Food and Tobacco Industry is represented on the Exchange by Fan Milk Limited and British American Tobacco. The ice-cream maker reported significant growth in profit after tax. However, this growth could not reflect in the industry?s after tax profit due to BAT?s lackluster performance during the year. The industry saw a 17% increment in its topline from ?469 billion to ?550 billion, while after tax profit edged up by 2% from ?64.4 billion to ?65.6 billion. The former, Fan Milk Limited outdoored a new product during the first quarter of 2006. Fan Milk?s Gold Horn [the new product] is presented in two flavours, the Classic and the Deluxe. Consequently, turnover is expected to grow through volume in subsequent periods.
The ICT Industry is represented on the bourse by Clydestone Limited. The industry registered a growth of 43% in its turnover and was ranked first while registering a 34% improvement in after tax profit to be ranked 4th. The industry?s topline improved from ?12.8 billion to ?18.4 billion while its earnings after tax improved from ?1.2 billion to ?1.6 billion. Ghana?s ICT Industry is growing and gradually becoming more competitive. Clydestone has extended its operations to Nigeria and is thus expected to be unaffected by Paypoint?s [its subsidiary] loss of business with ECG. Turnover and profit growth may however be constrained. With the increasing awareness of insurance in Ghana, the insurance industry is expected to register growth [albeit not as fantastic as that of 2005], especially from the life business.
Expansion projects being undertaken by manufacturing industry players are expected to culminate in increased output, turnover and profit, bolstered by economies of scale.
In spite of record high gold prices on the world commodities market, the industry posted lackluster financial results. Prospects for growth in the future however remain vibrant as countries aspire to revert to holding their international reserves in gold.
Companies in the Pharmaceutical Industry in Ghana are exempted from paying tax on active ingredients of essential medicines. This will enable the industry to direct funds towards distributing their products and expansion. CEOs of listed companies have expressed optimism about their performance for the 2006 calendar year. They are therefore expected to experience stronger growth in the first quarter?s financial results to be released during the second quarter of this year. The best performing industry on the Ghana Stock Exchange for the year ended December 31, 2005 was the Insurance Industry, represented by Enterprise Insurance Company Limited, according to Ms Aggrey?s analysis. The Insurance Industry placed first for profitability [120%] while placing 2nd for topline growth [42%]. Turnover growth for the industry moved forward from ?63.9 billion in 2004 to ?91 billion in 2005. After tax profit for the industry more than doubled, from ?8.4 billion to ?18.5 billion, propelled by capital gains on investments.
According to the Databank analyst, even though the manufacturing industry?s turnover declined by 4% from ?840 billion to ?808 billion during the period under review, after tax earnings increased by 6% from ?26 billion to ?27 billion. Declining interest rates, relative exchange rate stability, re-opening of VALCO and 84% completion of West African Gas Pipe-Line have given the industry the impetus to operate more profitably and to undertake expansion projects. CEOs in the industry show great optimism for the 2006 financial year. The Mining industry recorded the worst fall in after tax profit [-269%] in spite of a 14% growth in topline. Topline for the industry closed the year at ?2.6 billion, up from ?2.3 billion while after tax earnings declined from ?108 billion to a loss of ?183 billion. Global trends of gold price favoured this industry, as record high gold prices were recorded in 2005.
Turnover for the pharmaceutical industry went up by 7% from ?83.8 billion to ?89.8 billion while profit after tax advanced by 62% from ?6 billion to ?9.7 billion. A new entrant, Ayrton Drugs was welcomed into the industry through its provisional listing on the Exchange on November 22, 2005. Turnover and net profit for the company were quoted at ?52.75 billion and ?8.38 billion respectively. On a comparative basis, the margins (pre-tax, net profit) have improved substantially, doubling from December 2004?s levels of 12% and 9% to 20% and 16% respectively for September 2005.
Turnover for Produce Buying Company inched up by 32 basis points from ?2,297 billion in 2003/4 to ?2,304 billion in 2004/5 while operating profit declined by 72% from ?103.4 billion to ?28.9 billion in 2005. This decrease was on account of a 38% increase in operating cost. The cocoa buying company thus posted an after tax loss of ?31.1 billion compared to an after tax profit of ?38.1 billion, representing a decline of 182%.
Macro-economic indicators point at a very positive economic performance with unmistakable expectations of strong growth in economic activity, Ms Aggrey submits. The Agro-Processing Industry will receive a boost through investment [in excess of ?7 billion] in rehabilitation and re-planting exercise earmarked for 2006. It will take a while, however, before the evidence of recovery will reflect in the company?s after tax profit.
The Banking Industry will continue to experience intense competition. Consequently, the industry?s margins are expected to continue to decline along with declining interest rates. The onus lies on the banks to strategise to increase non-funded income. To withstand the competition, banks would also have to grow healthy loan portfolios while reining-in operating expenses. The Bank of Ghana?s directive to increase minimum stated capital from ?20 billion to ?70 billion by the close of 2006, will result in banks [that do not meet this requirement yet] moving funds from their surplus accounts to stated capital accounts, doing rights issue, Initial Public Offers, merging with or being acquired by others in order to meet the requirement.
The brewery industry is promoting responsible drinking as the theme for its advertisements. This, coupled with synergies arising from the duopolistic power of the major players in the industry, should enable the industry?s turnover to steadily increase in the period ahead. The consumer goods industry is poised to increase its turnover and profit after tax through volume growth. In this vein, the industry?s players are establishing more supply depots farther inland. Increasing mark-up in the light of declining inflation is not an option for the consumer goods industry, because any such moves will promote smuggling and imports of cheaper substitutes. The distribution and trading industry players are diversifying their incomes sources in an effort to ensure steady growth in topline and after tax profit.
The Food and Tobacco Industry?s growth will depend greatly on patronage of Fan Milk?s products. Ghana is a country with a low smoking culture, while the Ministry of Health now requires a health warning seal, issued by the ministry to be displayed on the package. BAT, which has been recording volume declines therefore, has the challenge of identifying alternative avenues of increasing profit.
Jonathan M D?Souza, the erstwhile General Manager of BAT?s BeNiTo [Benin, Niger and Togo] operations was appointed a Director of BAT [effective December 31, 2005] and General Manager for West Africa Central operations with effect from January 1, 2006.
He replaced Bernard Mavambu who served the CEMAC economic area [Cameroon, Gabon, Chad, Central African Republic and the Republic of Congo] until his resignation on December 31, 2005.
Jonathan D?Souza, who joined BAT in April, 1993 has served in various capacities, including Systems Analyst and Computer Programmer, IT Project Manager and IT Manager for the group.
Mr D?Souza is currently based in Accra.
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