Valuation in consumable sector declines due to abysmal financial performance

Alex Boahen, Head of Research at Databank has disclosed the poor valuation of food and consumable sector is as a result of abysmal financial and operational performance.

Comparatively, the food and consumable sector stocks performance on the Ghana Stock Exchange were significantly poor for the first half of 2020 in juxtaposition with their performance in the same period in 2019.

“The decline in the share prices for the consumer sector stocks on the stock exchange for the first half of this year is largely attributable to the weak operating and financial performance of the underlying companies. For example, Unilever reported a net loss of GHS16.8 million in the first half of this year as against a profit of about GHS17 million last year. There’s a similar case for Fan Milk and GGBL who have a major improvement in recent times.”

All the three food and consumable sector stocks on the local bourse– Guinness Ghana Breweries, Unilever Ghana and Fan Milk –as of June 2020, had declined in their valuation by 28.9, 14.7 and 56.3 percent respectively.

During the course of the first six months of 2019, reports indicate that Guinness Ghana Breweries witnessed no decline, while Unilever Ghana and Fan Milk declined in their valuation by 0.7 and 37.5 percent respectively.

In spite of the foreboding blight on the consumable sector, Mr. Boahen was particularly hopeful of a recovery in the performance of the food and consumable sector companies as COVID-19 restrictions continue to be eased.

“We are likely to witness some slow recovery as government eases restrictions further. Fan Milk for example depends largely on outdoor sales hence the lack of movement that hit major regions as a result of COVID-19 induced restrictions really affected them. But that should change slowly as things get back to normal,” he noted.

Stocks Exchange performance for June

For June 2020, local bourse on twelve financial sector stocks, ten of them had declined in their valuation, one experienced no change while one stock appreciated.

In comparison to the first half of 2019, only 8 stocks declined in their valuation, one remained unchanged, while 3 appreciated.

From January to June this year, companies like GCB Bank, Republic Bank and Ecobank Transnational Incorporated witnessed a drop in their share prices to the tune of 33, 28 and 25 percent respectively.

Similarly, the trio also witnessed a total of 200, 5,000 and 21,700 of their shares bought and sold respectively.

Also, the Agricultural Development Bank remained unchanged opening the year at GHS5.06 pesewas per share and staying the same as at June 30, 2020.

SIC Insurance however appreciated by 25 percent over the same period, opening the year at 8 pesewas per share and ending the month of June at 10 pesewas.

The poor performance of the financial stocks has been generally attributed to a combination of poor public sentiments, the fallouts from the banking sector reforms as well as the impact of COVID-19.