Transcorp’s quarterly profit down by 63% amid forex scarcity

Transnational Corporation (Transcorp) witnessed a slump in net profit by 63 per cent or N3.2 billion in the first quarter of 2023 compared to a year ago.

The loss was triggered by instability in Nigeria’s foreign exchange rates and an increase in the direct cost of doing business that decelerated profit.

The corporation incurred N2.4 billion in foreign exchange loss on borrowings, almost five times more than the figure for the first quarter of last year. This was recorded after the company repaid dues on debts denominated in foreign currencies as the naira continued to fall against the US dollar.
The local currency depreciated by 2.1 per cent to N745.05 on the black market within the period, according to @naira_rates, which tracks rates using an API.

This is compounding the plight of manufacturers and businesses, many of whom use the black market more than the official foreign exchange window, where the dollar is cheaper but is gravely in short supply.

Transcorp is currently repaying a loan of $215 million from Africa Finance Corporation, which originally matured in December, proceeds of which went to purchasing a power plant in Ughelli, Delta State.

The facility has been restructured to expire this year and now runs at a floating interest rate of 90 days, according to its audited financial report for last year.

Turnover for last quarter jumped 3.2 per cent to N32.4 billion on improvement in room revenue and income from food and beverage.

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Cost of sales was up by 12.4 per cent at N18.2 billion, spurred by increased food & beverage expenses and natural gas costs from the corporation’s hotel and hospitality and energy subsidiaries, respectively.

The group’s administrative expenses rose to N5.9 billion from N5.2 billion a year ago, driven by higher management and incentive fees and other operating expenses.

Pre-tax profit shrank by half to N2.9 billion, while after-tax profit declined to N1.9 billion from N5 billion.

Transcorp recently added Femi Otedola, the chair of FBN Holdings and Geregu Power, to its rank of substantial shareholders after the tycoon hit the 5.5 per cent threshold.