Julius Berger’s Naira Windfall: A Case Study in FX Volatility and Construction

Julius Berger, a significant player in Nigeria’s construction sector, recently posted impressive figures, revealing a more than fivefold upswing in net foreign exchange (FX) gains for the nine months concluding September 30, 2025. The company attributes this jump to the naira’s shifts against other currencies which generated substantial revaluation gains on its foreign currency assets. Specifically, the company’s net FX gains ballooned to N39.29 billion, a hefty climb from the N5.69 billion recorded in the equivalent period of 2024. It appears the ups and downs of the naira have unexpectedly favored Julius Berger.

The revenue side also tells an interesting story. Revenue saw a 34 percent upswing, reaching N540.82 billion, up from N405.00 billion. The growth appears to have come from accelerated project execution within Nigeria and expanded operations abroad. Breaking it down, European revenue nearly doubled, and African revenue also experienced growth, landing at N498 billion.

It’s worth noting, however, that rising costs accompanied this revenue growth. The cost of sales grew as well, hitting N460.66 billion amid pervasive inflationary pressures affecting materials and logistics. Administrative expenses similarly climbed, and impairment on receivables saw a significant jump. It suggests payment delays from clients are becoming a more pronounced challenge.

Still, Julius Berger navigated these challenges reasonably well. Operating profit climbed to N24.22 billion, a substantial jump from N14.53 billion. The bottom line revealed a profit after tax of N18.25 billion, bettering the N12.31 billion from the year prior. These results, according to the company, were supported by FX gains and revenue growth.

Beyond the income statement, the balance sheet offers additional clues. Total assets expanded considerably, which the company explained was a result of currency revaluation and increased capital expenditure. A significant increase in property, plant, and equipment, jumping to N298.55 billion from N76.33 billion, suggests capital investments, amplified by FX translation effects, are a key factor. Cash and cash equivalents also improved, partly aided by FX translation gains.

The company seems to have taken steps to reduce its debt burden. It has apparently repaid all outstanding borrowings, bringing leverage to zero. Lease liabilities also saw a slight moderation. Tax receivables also shrunk, indicating better performance in recovering VAT and withholding tax.

The cash flow statement reveals a turnaround in operating cash flow. The company reported N20.13 billion in net cash from operations compared to a negative N41.87 billion previously. Higher customer collections appear to have driven this, even as payments to suppliers and employees increased. Investing activities brought in net inflows, supported by proceeds from asset disposals and interest income. Meanwhile, financing activities showed a net outflow due to lease payments, dividends, and interest expenses. No new borrowings appear to have been undertaken.

Overall, the company states its cash position improved, equipping it to manage upcoming project demands.

So, what do we make of this?

Firstly, the impact of the volatile Nigerian Naira on corporate earnings, especially for companies holding foreign currency, is undeniably significant. Julius Berger’s experience underscores this point. A weaker or unstable naira can, ironically, create opportunities for companies with substantial foreign currency holdings through revaluation gains. However, this is far from a reliable strategy, as a stronger naira would produce the opposite effect. The company’s gains are linked to macro-economic trends which are ultimately outside its control.

Secondly, the construction industry in Nigeria seems to be experiencing both growth and challenges. Julius Berger’s revenue growth paints a picture of increased activity, potentially fueled by infrastructure development projects. Yet, escalating costs and payment delays suggest some underlying difficulties, potentially affecting profitability in the long run. One has to wonder whether this current performance is sustainable, given these pressures.

Thirdly, Julius Berger’s strategic decisions seem geared toward financial stability. The reduction in debt and the focus on improving cash flow suggest a prudent approach to capital management. This is likely a response to past experiences and a recognition of the unpredictable nature of the Nigerian economic landscape.

The story isn’t just about Julius Berger. It reflects the broader economic realities within Nigeria. Companies need to develop robust strategies to navigate currency fluctuations, manage costs effectively, and mitigate the risk of payment delays. It also shows that seemingly negative macro events can sometimes produce positive micro results, even if unintended. I am cautiously optimistic about Julius Berger’s future. Their recent performance is encouraging, but it remains to be observed whether they can sustain this momentum in the face of economic uncertainties. Only time will reveal whether the gains are structural improvements to the company, or simply a lucky consequence of Naira instability.

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Keywords: Julius Berger, Nigeria construction, FX gains, Naira volatility, revenue growth, project execution, operating profit, debt reduction