Last week, Union Dicon Plc (UDS) announced it had struck a deal with the Federal Government that it was replacing Cargill as the core investor in the $100m Alape Staple Crop Processing Zone in Kogi State.
While the FG did not provide details of how much UDS was going to invest, the Minister of Agriculture, Audu Ogbeh, expressed delight at the signing of the deal.
“I’m glad to see that a Nigerian company is taking over this very important project, and is championing the indigenous development of agribusiness,”
The Managing Director of the company also expressed confidence in the ability of his company and was quick to reveal that they were an indigenous company and quoted on the Nigerian Stock Exchange.
“It is a remarkable opportunity to develop the agribusiness space in Nigeria from a fully indigenous perspective. Union Dicon is listed in the Nigerian Stock Exchange, and it is a wholly Nigerian company…..we are grateful for the support given by the Honourable Minister, and the Agriculture Ministry, after careful consideration of our proposal. Their detailed understanding and focus on new capital investment, import substitution and job creation really impressed us and allows Union Dicon Plc to move forward confidently in a willing and positive partnership.”
What he did not reveal however, was the financial health of his company as at the end of December 2015. In a recently released 2015 Audited results the company revealed that it posted a loss of N2.6 million and up from N87.6 million a year earlier.
But that is not all.
The company also reported that it earned zero top line revenues for the financial year making this the second year straight that it is ending the year without a single top line revenue. It did report that it paid out N80.9 million in so-called Administrative expenses.
We like to call firms like this “SLM” Specialized Loss Making Companies but UDS goes a step further. It is also a Zombie company as it has not generated a single top line revenue in two years. To be sure UDS did make some money but not from its core functions of manufacturing. Under other operating income it lists rental income as N70.9 million for the year. It may make better sense then to classify the firm as a real estate company rather than a manufacturer of industrial salt.
Indeed the firm’s auditors (BDO Professional Services) stated this much:
“Without qualifying our opinion, we draw attention to note 24 in the financial statements which indicates that the Company made a loss before taxation of N2,632,000 during the year ended 31 December 2015, and as at that date its current liabilities exceeded its current assets by N989,804,000 and the Company had a negative shareholder funds of N1,162,549,000. These conditions along with other matters as set in note 24 indicate the existence of a material uncertainty which may cast significant doubt about the Company’s ability to continue as a going concern, unless the Company’s bankers continue their financial support and the shareholders introduce additional capital not only to wipe out the negative shareholders’ funds but to enable the Company operate profitably.”
UDS had N54.5 million as employee salaries and benefits, up 10.5 percent from N49.7 million despite not engaging in any manufacturing in the period. It will be interesting to know how many employees were actually on payroll for the period.
We know that UDS is undergoing some form of restructuring to bring it back to profitability, but the recently announced deal with the FRDA is a source of concern to Nairametrics.
How UDS hopes to finance this transaction with this balance sheet is the stuff made of legend. The company only had N137k in cash as at the end of 2015 rendering it technically insolvent. Fortunately or sadly these things don’t matter in Nigeria. Not when you have the likes of General TY Danjuma on you board as Chairman and Chuka Mordi as Managing Director. It’s easy to assume that the General’s influence might have helped secure that deal. From a negative equity of N1.1 billion and cash of N137 k the company is now primed to be a core investor in a Government asset worth about $100m.