Revenue from energy underpins Transcorp’s profit margins

Transnational Corporation of Nigeria (Transcorp) Plc has utilized every Naira invested in revenue in generating higher profit as margins surged, thanks to contributions from the energy business.

The stellar performance means the company with interest in hospitality, oil and gas, power and Agriculture has surmounted the headwinds brought on by lower oil price and devaluation of the currency.

Analysts are of the view that the company’s investment in the power sector is beginning to trickle down to the bottom line (profit).

They added that the conglomerate’s additional power generation will bolster future sales and magnify shareholders’ earnings.

For the first six months through June 2018, Transcorp’s net margins improved to 20.17 percent from 12.17 percent as at June 2017.

The growth in margins were largely driven by a 65.31 percent increase in  revenue from energy sent out to N 29.79 billion in the period under review as the firm’s diversified revenue base continues to underpin earnings.

Revenue from energy sent out make up 53.15 percent of total sales.

“They have the Sapele Power Plant and there has been an improvement in generation capacity that is contributing to revenue growth,” said Johnson Chukwu, managing director and CEO of Cowry Assets Management.  

In Septemer 2012, during the privatization of Nigeria’s national power assets, TranscorpPlc won the bid for the Federal Government of Nigeria’s distressed power generating company, Ughelli Power Plc – operator of Ughelli Power Plant. The $300 million investment was part of strategic investor Heirs Holdings’ commitment to USAID’s Power Africa initiative.

In November 2015, TranscorpUghelli Power Limited and Ughelli Power Plc merged, and Transcorp Power Limited was born. The merger harmonized the management and operations of Transcorp’s power business for greater efficiency.

When Transcorp took ownership of the 1000MW capacity plant in 2013, our mission was to take it from generating only 160MW of power daily, back to producing at its full 972MW capacity.

Today, Transcorp Power has increased its generating capacity by 525 percent, and plans to grow it to over 3,000MW in the next five years.

 Transcorp’s net income surged by 161.26 percent to N10.87 billion in June 2018 as against N4.16 billion the previous year.Operating profit otherwise known as EBIT spiked by 82.17 perccent to N17.34 billion in the period under review from N9.52m billion the previous year.

The conglomerate has reduced exposure to financial risk as evidenced in an improved leverage ratio and reduction in debt.

Debt to equity (D/E) ratio fell to 95.20 percent in June 2018 as against 117.20 percent as at June 2018.

The conglomerate’s time coverage ratio is 3.44 times earnings.In other words, the firm’s operating income can over interest expense.

Transcorp’s share price gained 1.23 percent as of 2:00 pm Monday, valuing it at N52.43 billion.