Julius Berger Plc is against the general trend of foreign exchange gains and losses that have shaped corporate earnings outcomes since 2023. The past two years have seen the construction firm record huge net foreign exchange gains, while many incurred foreign exchange losses.
The trend has shifted this year, with companies generally exiting crippling foreign exchange losses, and Julius Berger dropping into a foreign exchange loss.
The company’s interim financial report for the half year ended June 2025 shows that exchange losses have been mounting since the first quarter, and profit has been diving since then as well. Net foreign exchange losses grew from N1.8 billion in the first quarter to N4.7 billion in the second quarter, adding up to over N6.5 billion in half a year.
This is a reversal from the net foreign exchange gains of N7.7 billion the company recorded at the end of half-year operations last year. It is also a downturn from net foreign exchange gains of N14.2 billion and N11.4 billion the company reaped in 2024 and 2023, respectively.
The exchange gains of the preceding years provided a cover that obscured the company’s underlying operating difficulties, which caused a profit drop to N7.9 billion in 2022. Revenue closed flat in 2023 at N443.4 billion, and a worse profit drop was prevented by the exchange gains of the year.
The company’s closing profit of N12.5 billion in 2023 was therefore largely accounted for by the net foreign exchange gains.
Pressure from costs increased in 2024 when the cost of sales claimed virtually the entire increase in sales, leaving gross profit flat at N71.5 billion. Operating profit dropped by over 32 per cent to N12.7 billion. In comparison, exchange gains and investment income overturned the drop in operating profit into an increase of 23.5 per cent in after-tax profit for the year to N15.5 billion.
With exchange losses replacing exchange gains of the last two years, the company’s underlying cost-income imbalance has been baring so far this year. Revenue growth is nowhere compared to cost increases, and profit is declining from quarter to quarter.
Turnover was up by close to 41 per cent year-on-year to N343.4 billion for Julius Berger at the half-year, reflecting a second quarter slowdown from an increase of 62.8 per cent in the first quarter.
Costs of sales grew slightly below sales at 38.3 per cent year-on-year to close at N283.4 billion at the end of June 2025.
An increase of N21 million or 54.4 per cent in gross profit to N60 billion was, however, insufficient to meet the increase in operating costs, particularly as exchange gains turned into losses.
Other gains led by foreign exchange gains had accounted for virtually the entire operating profit of over N17 billion by the end of the first half of 2024. At the end of the half-year operations this year, other losses of N3.6 billion replaced the gains of the previous year, slashing operating profit from nearly N18 billion to N9.4 billion year-on-year.
Investment income, which helped keep profits elevated last year, dropped by 28.8 per cent year-on-year to N6.6 billion, while the cost of finance grew by one and a half times to N2.8 billion over the period.
Pre-tax profit dropped by 47.6 per cent to N13 billion at half year, while the bottom line closed at N7 billion, representing a drop of 38.7 per cent year-on-year.
The company’s critical downside forces this year is the reversal of other gains, led by foreign exchange gains, to other losses also driven by foreign exchange losses. Other gains were as big as N26.5 billion at the end of last year, covering more than the N15.5 billion closing profit for the year.
The sudden drop from the height of other gains to losses is the main bearish point on Julius Berger this year. Further build-up of other losses can be expected in the second half, indicating that the company’s falling profit will likely follow it for the full year.
The company closed its half-year operations with earnings per share of N4.34, a drop from N7.17 per share in the same period in 2024.
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