As the coronavirus (COVID-19) continues to weaken prices in the global energy sector, Trinidadian conglomerate National Enterprises Limited (NEL) has indicated that it will have to consider diversifying its investment portfolio to deliver shareholder value.
“NEL’s concentration of investment in the energy sector has changed its fortunes. At the time that the sector was at its peak, NEL was formed to give individual investors the opportunity to participate in these fortunes,” a section of it annual report for financial year (FY) 2020 stated.
It continued: “As the table turns, the focus in this sector has resulted in a change in the investment horizon for NEL’s shares. Thus, NEL must look to diversification of its investment portfolio to climb out of what has become the muddy pond of energy sector focus.”
NEL’s portfolio of investments consist of a mix of energy, telecommunications, engineering, and manufacturing.
For the year under the review, which ended March 31, 2020, the company reported a net loss of TT$327.5 million, compared to net profit of TT$12.5 million for the previous fiscal year.
Despite its heavy investment in the energy sector, NEL pointed out that, “The Telecommunications Services of Trinidad and Tobago (TSTT) was largely accountable for the decline in the subsidiaries category and NGC NGL Company Limited in the joint ventures and associated companies group.”
The company recorded a significant fall in revenues, moving from TT$127.15 million in FY2019 to TT$31.27 million in 2020. The dip is mainly attributed to 75.8 per cent less income from dividends.
Furthermore, the company saw a 227 per cent increase in its loss on fair value revaluation on investments.
NEL thus explained that the decline in the valuation of its assets, particularly those in the energy category, were due to the ongoing pandemic which has reduced demand for natural gas.
For FY2020, the company’s total assets devalued by 15 per cent less than the TT$2.93 billion a year prior.
“The uncertainty associated with the impact of the COVID-19 pandemic on economic ‘wellness’ will not allow for projections on the performance of the NEL’s investment portfolio and ultimately the likelihood of improved dividend income in the short to medium term,” NEL outlined.
Still, the company pointed to its investment strategy.
“However, NEL is an investor in long-term assets in the main. Ours are ‘patient’ investments. We will continue to monitor performance and, as the market will allow, pursue avenues for diversification and investment management that will allow us to manoeuvre this volatile time.”