The construction sector stands as Africa’s most expansive and rapidly advancing industry, boasting significant employment opportunities and serving as a cornerstone of the continent’s economy. Annually, this sector attracts billions of dollars in investment from governmental, consortium, and private sources. Given the rapid urbanisation trend, it’s evident that the construction sector in Africa is thriving and poised for sustained growth in the foreseeable future. Serving as a substantial pillar of the continent’s economy, the construction industry encompasses a wide spectrum of needs, ranging from quarrying, mining, and forestry to infrastructure development like roads and buildings.
The swift expansion is propelled by a dual force: government expenditure on infrastructure initiatives and private capital injection into residential and commercial properties, including shopping complexes and retail establishments. Energy, power, and transport projects have consistently been key contributors to the sectoral mix of projects underway, while the real estate domain, particularly commercial real estate, has gained prominence as a pivotal sector in recent times.
Julius Berger Nigeria Plc is a foremost Nigerian company providing comprehensive construction solutions. Engaged in the full spectrum of civil engineering and construction works, the company undertakes projects ranging from office complexes, residential dwellings, and sports amenities to critical infrastructure like roads, bridges, railway networks, airports, dams, and water supply systems. Julius Berger Nigeria Plc also maintains business operations across various sectors including plants and factories, oil and gas, marine, power, ports, and shipping.
In 2023, the company generated a revenue of ₦443.1 billion ($493.9 million), showing a marginal increase of +0.5% from the ₦441 billion ($983.7 million) reported in 2022. The company’s performance in 2023 was largely attributed to the steady performance of its civil works segment, complemented by significant revenue growth in its emerging diversified business.
Source: Julius Berger Nig Plc Financial Report
Similarly, the company experienced an upward trend in profit before tax, despite the decrease in gross profit during the review period. Profit before tax showed significant growth of +41.9%, indicating strong profitability driven by operational efficiency and improvement in other income streams. The increase was mainly fueled by its construction contracts spanning civil works, building projects, services, and other business expansions. Furthermore, the company witnessed a decline in finance costs due to a reduction in interest-bearing loans. With over 70% of the company’s liabilities being non-interest bearing, this led to lower financing expenses and improved cash flows.
Despite facing ongoing economic challenges in Africa, such as rising costs and exchange rate crises, Julius Berger Nigeria has continued to expand its assets through increased contracts from both the Nigerian government and neighbouring countries. The company’s total assets reached ₦686.9 billion ($765.6 million) in 2023, up from ₦505.7 billion ($1.1 billion) in 2022, representing a growth of +35.8%. The leading engineering construction company in Nigeria is pushing boundaries by venturing into Cotonou, Republic of Benin, where it has secured a contract to rehabilitate and improve access roads and crossings in the commercial city. Additionally, the company recently won a contract from the federal government of Nigeria to rehabilitate and complete the Abuja-Kaduna-Zaria-Kano Road.
As projected by Fitch Solutions, Nigeria’s construction industry is expected to experience an average long-term growth rate of 4.4% per year from 2024 to 2033. The forecast places Julius Berger Nigeria Plc in a favourable position to contribute value to both the economy and its shareholders. Factors such as population growth, rural-urban migration, and inadequate infrastructure highlight the favourable long-term growth prospects for the company. Also, developments like the construction of a new deep-sea port in Lekki and the Trans-African Highway are anticipated to increase Nigeria’s accessibility to export markets and foreign trade, further supporting growth opportunities.
In line with Julius Berger’s growth strategy, the company has made significant progress in expanding its market presence and diversifying its project portfolio as the company is majorly in charge of infrastructural projects in Nigeria. Successfully venturing into emerging sectors such as agro-processing, Julius Berger has broadened its revenue streams, contributing to value creation in Nigeria’s economy.
Disclaimer: This article is meant for informational purposes only and is not a recommendation to buy, sell, or hold a position in this stock. Migasuto will not be held liable for any investment decision taken based on the information provided in this newsletter.
References
- Julius Berger Nigeria Plc (2024). Financial Report
- Oanda Currency Converter (2024)
- Fitch Solutions (2023). Nigeria Infrastructure Report
- Julius Berger Nigeria Plc (2023). Investors Presentation
- United Nations Environment Programme (2023). Building a sustainable future: Unlocking Africa’s Potential in the construction Industry
- Vanguard News (2023). Nigeria’s Construction Industry to Hit $47billion
- Mantrac Group (2023). The Dynamics of the African Construction Market
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