This may not be the best of time for shareholders of Nigerian leading indigenous energy group Oando Plc which is listed on both the Nigerian Stock Exchange (NSE) and Johannesburg Stock Exchange, as the company has issued a profit warning to the market that they expects to report materially lower earnings for the just ended second quarter June 30, 2016.
According to a statement sent to the Exchange, the company attributed the expected low earnings to the impact of the naira devaluation against the US Dollar, resulting in unrealized foreign exchange losses. The company explained that the warning is only based on the unaudited financial statements for the period ended June 30, 2016.
Oando pointed out that the impact of the naira devaluation is expected to amount to an unrealized foreign exchange loss arising from the US Dollar denominated liabilities, outstanding bank trade facilities as well as vendor payables. Oando explained that as at the time of the devaluation the company had US Dollar denominated borrowing 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.
The statement noted that “A circa 40 percent 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 Plc added that despite the challenging operating landscape in 2016, “we reiterate our focus of returning the Group to profitability by growing our dollar earning higher margin upstream and export trading businesses, which will not be impacted by the volatility of Foreign Exchange rates to the Naira. We remain confident in our diversified business model and the long-term prospects for growth in Nigeria and beyond”.