Jump In Costs Slow Down Transcorp’s Profit To N22.7bn In Q3 2023

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Transcorp Plc experienced all-around cost increases from cost of sales to income tax expenses in the third quarter – which caused a profit drop in the quarter and slowed down the nine months profit to N22.7 billion.

Quarterly profits fell from over N14 billion in the second quarter to N6.6 billion in the third, as sales revenue slowed down and expenses grew. An exceptional growth of 104 per cent in after-tax profit in the second quarter gave way to a drop of 5.7 per cent in the third quarter.

The company’s interim financial report for the nine months ended September 2023 shows a loss in operating momentum for the conglomerate in the third quarter, as quarterly sales revenue went down from nearly N50 billion in the second quarter to less than N46 billion in the third.

Sales revenue growth rate equally nosedived from about 58 per cent in the second quarter to 37.6 per cent in the third. This was followed by cost increases, which consumed revenue, squeezed margins and lowered profit for the quarter.

Production cost grew ahead of sales revenue in the third quarter at 40 per cent to almost N25 billion compared to the 37.6 per cent growth in sales.

Administrative expenses jumped by 79 per cent in the quarter to over N9 billion with the third quarter accounting for over 39 per cent of the administrative cost of N23 billion for the nine months of operations.

Other income of N510 million in the same quarter of 2022 reversed to another expense of N422 million in the third quarter of 2023.

The cost increases claimed most of the gain of N5.4 billion in gross profit for the quarter, leaving an operating profit of N12.8 billion for the three months.

There was also a major increase of almost 64 per cent in finance cost in the quarter to over N6 billion. Pre-tax profit closed flat at N7.6 billion for the third quarter while a high jump of over 113 per cent in income tax to N1 billion directly led to the profit drop for the third quarter.

The company’s earnings figures for the nine months of trading are a dilution of an accelerated second quarter with a slowdown in the third quarter.

Sales revenue at the end of the third quarter amounted to N128 billion, which is an increase of 33.3 per cent year-on-year.

Production cost grew at a slower pace of 28.7 per cent to N63.8 billion at the end of the period, accelerating however from 22 per cent growth at the half year.

Gross profit rose by 37.6 per cent to over N64 billion, down from an increase of 39 per cent at the end of half-year operations.

Administrative expenses grew by 45.5 per cent to N23 billion and claimed an increased share of revenue. The same is true of impairment loss on financial assets that advanced by over 78 per cent to N508 million over the period.

Operating profit slowed down at an increase of 35.6 per cent to N42.7 billion at the end of the third quarter from an increase of over 46 per cent at half-year.

The company continued incurring foreign exchange losses, which grew from N1 billion to over N6 billion during the review period while interest expenses on the company’s over N95 billion borrowings rose from N10.4 billion to N13.3 billion over the period.

The company closed the third quarter operations with a pre-tax profit of N26 billion, which is an increase of 25 per cent but a slowdown from about 39 per cent rise at half year.

The closing profit of N23.7 billion for the period is an increase of 19.4 per cent year-on-year but also down from 33 per cent growth at half year close.

Transcorp earned 36 kobo per share at the end of the third quarter operations, improving from about 22 kobo per share in the same period in 2022.

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