Coronanomics (22) - Sectorial Analysis of Nigeria's Transportation and Storage Sector

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Sunday, June 28, 2020 07:00 AM / by Proshare Content/ Header Image Credit:  EcoGraphics


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Transportation and Storage

Transportation and storage sector is made up of six activities which include road transport, rail transport and pipelines, water transport, air transport, transport services and post and courier services. The transportation and storage grew by 2.82% in Q1 2020 from -0.80% in Q4 2019 and 19.50% in Q1 2019.

 

In 2019, road transport grew by 2.83%, rail transport & pipelines under transportation sector grew by 2.09%, water transport recorded a slight growth of 0.08%, air transport recorded the highest growth of 5.68%, transport services contracted by -1.38%, post and courier services contracted by -1.01%.

 

To curb the further spread of the coronavirus, there have been restrictions in international travels as well as inter-state travels which has negatively affected the air transport sector as some airline companies have laid off some staff, furlough some of them and have recorded a significant rise in their debts.  The lockdown in some parts of the country hindered the free movement of goods and services and hence limited some transporters' ability to generate income.

 

Chart 121: Aviation Sector Quarterly Growth Rate (%)

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Source: NBS, Proshare Research

Note Asterisks (*) - Forecasted figures 

 

It is predicted that the transport sector will record very slow growth in Q2 2020 and the rest of the year while it is expected to record full recovery in 2021 (see Chart 122).

 

Chart 122: Transportation and Storage Sector Quarterly Growth Rate (%)

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Source: NBS, Proshare Research

Note Asterisks (*) - Forecasted figures 

 

Case Study: Understanding The ABC of Transport

ABC Transport Plc is a road transportation company that ferries goods and people across surface transport networks along the West African coast. The company is involved in haulage services, importation and sales of vehicle spares, installation of motor vehicle speed governing devices, assembly of heavy-duty trucks under the automative policy of Nigeria and the hospitality business.

 

ABC Transport Profit Before Tax

ABC Transport recorded mixed earning performance between 2015 and 2019. It recorded losses in 2015 and 2016 of N259.97m and N490.58m respectively. Its profit grew by 551.81% in 2019. Its profit increased from N67.13m in 2018 to N437.56m in 2019 (see Chart 123).


In 2016, when there was a recession it recorded a loss of N490.58m. Due to the recent COVID-19 pandemic, there has been a series of nationwide lockdowns and restrictions which may cause a decline in the company's 2020 revenue and profit.

 

Chart 123: ABC Transport PBT (N'mn) 2015-2019

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Source:  ABC Transport Financials, Proshare Research

 

 

ABC Transport Revenue

ABC Transport revenue grew by 5.54% in 2019. Its revenue increased to N7.24bn in 2019 from N6.86bn in 2018. The lockdown is predicted to hurt the revenue of ABC Transport . The restriction and lockdown affect transport workers have they could not engage in interstate travel neither within the state, if the virus continues to spread the revenues of the company are predicted to further worsen (see Chart 124).

 

Chart 124: ABC Transport Revenue (N'bn) 2015-2019

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Source:  ABC Transport Financials, Proshare Research

 

ABC Transport Current Ratio

ABC Transport current ratio declined to 0.75 in 2019 from 0.77 in 2018. A low current ratio indicates that a firm may have difficulty meeting current obligations. The pandemic is predicted to further worsen its ability to meet its current obligations (see Chart 125).


Chart 125: ABC Transport Current Ratio

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Source:  ABC Transport Financials, Proshare Research 

 

ABC Transport Acid-Test Ratio 2015-2019

ABC Transport acid-test ratio was below one between 2015 and 2019. This indicates that ABC Transport does not have adequate assets that could easily converted to cash to pay off all its current liabilities. Its acid test ratio is forecast to worsen within the coronavirus pandemic(see Chart 126).

 

Chart 126: ABC Transport Acid Test Ratio 2015-2019

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Source:  ABC Transport Financials, Proshare Research

 

ABC Transport Leverage Ratio

The company's leverage ratio was 39.09% in 2019. Its leverage ratio increased from 22.3% in 2018 to 39.09% in 2019 (see Chart 127).


It is expected that ABC Transport' will record a rise in leverage ratio for 2020, as a result of an increase in its cost of operations as well as aa downturn in customrer patronage and revenue.

 

Chart 127: ABC Transport Leverage Ratio (%) 2015-2019

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Source:  ABC Transport Financials, Proshare Research


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Related Reports (PDF)

1.     Download the Full PDF Report - Coronanomics and the Nigerian Economy, June 06, 2020

2.     Executive Summary PDF - Proshare, June 06, 2020

 

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