The management of Oando Plc has alerted the investing public that the company suffered foreign exchange (forex) losses, which reduced profit in the second quarter and negative affected the group’s half-year results. Oando’s share price dropped by 4.07 per cent to N6.60 at the stock market.
In a profit warning released at the Nigerian Stock Exchange (NSE), Oando stated that earnings for the first half of 2016 will be materially affected by the impact of Naira devaluation against Dollar. Oando was said to have recorded forex loss of N21 billion.
According to the company, as at the time of the devaluation the company had Dollar-denominated borrowings of $261 million in its Naira-dominated earnings businesses, consisting of $68 million in core loans, $89 million in bank trade facilities, $83 million in asset financing and $21 million in other payables.
Oando stated that the impact of the forex change is expected to amount to an unrealized foreign exchange loss arising from Dollar-denominated liabilities, outstanding bank trade facilities as well as vendor payables.
“A circa 40 per cent devaluation in the value of the Naira against the US dollar from the bank rate of N199.00:$1.00 to N280.00:$1.00, has effectively resulted in these significant foreign exchange losses which we have prudently booked into our financial statements,” Oando stated.
The company however assured that despite the challenging operating landscape in 2016, it remains focus on returning to profitability by growing its dollar earning higher margin upstream and export trading businesses, which will not be impacted by the volatility of forex rates.
“We remain confident in our diversified business model and the long-term prospects for growth in Nigeria and beyond,” Oando stated.
The decline came as Oando recently reported a net profit of N4.1 billion in the first three months of this year. The three-month first quarter results showed that Oando bounced back to profitability with net profit of N4.1 billion in first quarter 2016 as against net loss of about N20.9 billion in comparable period of 2015. However, turnover decreased by 34 per cent to N64 billion in first quarter 2016 as against N97.1 billion recorded in corresponding period of 2015.
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