…others rely on cash flow to pay down debts.
Nigeria’s largest telecommunications firm, MTN retained its position as the largest borrower on the stock exchange after it reported a total short- and long-term loan balance of N578 billion as of June 2021. MTN ranked higher than all the companies listed on the Nigerian stock exchange when it came to borrowing from banks and the debt market.
The company is well known for strategically relying on loans to drive operations resulting in astronomical returns on average equity often in the higher double digits. As of December 2020, MTN’s total external loan was N521.5 billion and has increased by 11% in under 6 months. This places its debt at 2.8x its equity. Closest to MTN in relying on debt to boost earnings and operations is Nestle Nigeria Plc. Nestle’s debt to equity is also 2.27x and posts an annualized return on equity of nearly 60%. MTN’s return on average equity is just over 60%. Cement Giants
While MTN has focused on increasing its debt profile, Nigeria’s Cement giants, Dangote Cement, Lafarge and BUA have moved in the other direction all recording massive drops in their loan portfolio. Dangote Cement, one of Nigeria’s largest-ever companies by profit and the largest by market capitalization, reduced its total external debts by 30.5% going from N493.9 billion in December to N197.9 billion as of June 2021. Lafarge cut its debt profile by 60.3% to N19.75 billion while BUA reduced its own debt by 30.5% to N191 billion. No new equity was raised by the trio in the first half of 2021, as they focused on organic cash flows to repay debt. According to our research, the companies have repaid their debts from cash flows generated from operations combining them with higher trade creditors. Between the three cement giants, they generated N469.7 billion in net cash flow from operations paying down N409.7 billion in debts. Food Processors
Just like MTN, major food processing companies like Nestle, Flour Mills and Honeywell relied heavily on debt to drive operations in the period under review. Their debt profile rose to N260 billion from N247 billion in the six months between December and June 2021. Flour Mills retained the most loan portfolio with N140.9 billion, lower than the N147 billion reported in December. Honeywell, which has been in controversy with the CBN over its loans to First Bank increased […]