This Corporate News Compilation for the week ended January 27th, 2018 is brought to you by Bluechip Technology Ltd Nigeria.
MULTICHOICE TO FACE THE MUSIC
Another week, another South African Company in the news; this time, Nigeria and Africa’s largest cable TV operator got a Federal High Court judgement against it which could cost the company N5.9 billion in damages. This is on the back of a suit brought against the company by the Musical Copyright Society of Nigeria Ltd.
The story goes that Multichoice asked the court to stop MCSN from asking or demanding that Multichoice obtain copyright licence for the broadcast and communication to the public of musical works on the radio and television channels operated and distributed by Multichoice. This was after MCSN had requested that that Multichoice pay N4.1 billion as cumulative copyright and royalties for its body of works used by the latter during the airing of its programmes. This case dates back to 2011 and will likely end up at the Supreme Court at this rate.
MTN WANTS TO TAKE ON BANKS
MTN had a loud and clear message for the fintech and financial services community last week: it wants to be the largest bank in Africa. It aims to do this by increasing its mobile money subscribers across the continent from the current 21 million to 60 million in the next 4 years. It claims that its number of 30-day active users is growing by about 500k monthly. MTN has over 90 million subscribers in Nigeria alone and over 230 million across its operations.
WE HAVE A BUYER FOR 9MOBILE
We learnt last week that Teleology, one of the bidders for 9Mobile has been shortlisted as the preferred bidder for the telecoms firm. Teleology is promoted by Adrian Woods, the first CEO of MTN Nigeria. This has been a controversial bid so far, especially if you consider all the back and forth rumours about Globacom having acquired the company and the several times when the NCC has had to shift the date for the closure of the bids.
Also recall that Globacom and Helios Partners failed to back their technical bids with concrete financial bids. Teleology private equity firm, with an investment portfolio of $11bn, is said to have offered more than $500m for the company. Teleology will have to inherit a company with a debt profile of about N200 billion and a negative shareholders funds of over N1.5 trillion. It’s going to take an incredible turnaround to get this company back in shape and we wish the potential new owners the best of luck.
SWEET AND PROFITABLE
Dangote Sugar has been one of the best performing stocks on the Nigerian Stock Exchange since last year. In the last 1 year, it has returned about 294%. Its CEO, Abdullahi Sule, was in the news last week and he told investors that the good old days of sugar are back again. In an interesting interview, he explained that they have seen orders pick up from confectioneries, bakeries and beverage companies. Unlike in Europe and other western societies where sugar consumption has dropped, it is expected to pick up in emerging markets like Nigeria. Dangote Sugar’s sales volume dropped by 17% last year (as at September), to 507,185 metric tons.
They are forecasting an increase of 20 to 25% in 2018, he said. They also project a profitability rise of 15 to 20% compared with 2017. The company says it is targeting producing about 1.08 million tons of white sugar annually in the next 5 years and 1.5 million tons per annum in the next decade. The CEO also claimed that they took advantage of cheaper raw sugar to cut its the ex-factory (retail) price for 50 kilograms (110 pounds) of sugar by 10% last week to 14,400 naira ($40) after maintaining “gradual price increases” last year to cover costs, he said.
IT’S GOING TO BE A GREAT YEAR FOR SALT
Another Dangote Company, NASCON, also informed investors that they expect better results in 2018 and that they will be “investing in backward integration projects as a strategy to diversify and add more value to both its shareholders and the Nigerian economy.” NASCON is also up by 190% in share price in the last one year and is likely to sustain this price level in the coming months. It appears that anything Dangote touches is gold these days.
Asahi Brands Limited, the operators of Bridgestone Tyres in Nigeria, opened its 6th branded retail outlet in Nigeria last week. Retail tyre outlets had in the past been ravaged by cost overruns, weak patronage and influx of second hand tyres in the country. There are also several tyre brands in the country making this a very competitive market. However, with the ban on 41 items still in force, retail tyre brands could have a better shot at capturing market share. Financial institutions should be watching this space as the flurry of branded retail outlets springing up across the country will need some form of credit to ensure sales pick up across board. I foresee the return of credits within the next 2 years.
MEGA DEAL FOR AN AMERICAN COMPANY
American company, KBR INC, announced that it has been awarded a contract from Indorama Eleme Fertilizer & Chemicals Limited (Indorama) and Toyo Engineering Corporation (Toyo) for the Train 2 ammonia plant at Indorama’s Port Harcourt. Under the terms of the contract, KBR will provide technology licensing, basic engineering design, proprietary equipment and catalyst for Indorama’s planned second ammonia plant in Port Harcourt. KBR is a leader in ammonia technology and has been involved in the licensing, design, engineering, and/or construction of more than 230 grass roots ammonia plants and over 100 revamp ammonia projects globally.
A GERMAN COMPANY SETPS UP SHOP
I am beginning to lose track of the many foreign companies opening shop in Nigeria and it is a good thing. German company, Olco Multi-business Limited has opened shop in Nigeria. The company is focused on crowd funding initiatives, job search and educational consultancy using 3 verticals – Fundmie, Workmie and Olco Study respectively. The company said that its plan is to use Fundmie to help startups raise funds “from the public”. I’m not sure if they know that raising funds from the public will require SEC approval if it is designated for an investment in a company. Nevertheless, this is an interesting space that has been in need of some structure. Who will be their likely competitors?
GOOD NEWS FOR COCOA PRODUCERS
Nigerian politicians were agog last week as they celebrated the “invention” of Nigeria’s first cocoa pod breaking machine. The machine was created by an indigenous firm, Oluarowolo Nigeria Limited and it is hoped that this will help boost cocoa production in Nigeria.
In fact, the Minister of State for Agriculture and Rural Development, Senator Heineken Lokpobiri, announced that the FG is ready to partner with the inventors to mass produce the machines. Farmers traditionally break cocoa pods using wood and machete which is not only laborious and time consuming but also uneconomical. The machines, by the way, are not new inventions as the technology exists in other parts of the world. There are also papers online that outline how the machines can be produced. This doesn’t in anyway take away the good work done by Oluarowolo.
NAME YOUR CURRY
Vanguard conducted an interesting market research on curry brands in Nigeria. According to the research, Nigeria’s curry market is divided into 2 main segments – local and foreign. The locally made brands include Tiger Curry and Euroma Curry produced by Tiger Foods Limited; Gino Curry produced by Africa GB Foods Manufacturing Nigeria Limited; Terra Curry powder, manufactured by TGI Nigeria and Ama Wonder Curry produced by KIB Food Processing Company. The foreign brands that have market share are Ducros produced by McCormick, France; Organic Curry powder, Lion Curry powder, and Rajah Mild Madras Curry. The report suggests that no one owns this market yet. Which of the curry products do you prefer using?
MR BIGGS IS CHANGING
Fast food pioneer, Mr Biggs, is looking to regain its mojo. They announced last week that they will be reworking their menu to include Nigerian dishes like bitter leaf soup, Ofe Owerri, Fisherman’s soup and other rice sauces to its traditional jollof rice and chicken meals. Mr Biggs’ dominance as a major food retail outlet has diminished over the years with the rise of The Place, Mama Cass, Mega Chicken as preferred fast food restaurants for locally made Nigerian dishes.
FMCG’S ARE GETTING WISER
An interesting Reuters report during the week provides insights into what most consumer goods companies in the country are doing to confront the Nigerian consumer market. The report claims that the likes of Unilever and Nestle are setting up manufacturing plants in the country in a bid to mitigate against the CBN restrictions on access to forex. Another tactic used by these firms is to sell their products in much smaller packs and sachets. Selling in smaller packs is not a new tactic but the reports highlights how consumer good firms such as Nestle, P&G and Unilever have come to rely heavily on it. Most lower and middle income households prefer to use smaller packs not just as a way of reducing cost but as a way of also cutting out waste. You have to agree that economic recessions often come with their own advantages.
WAKANOW IN FINANCIAL HOT WATER
Nairametrics reported last week that Nigeria’s largest travel agency, Wakanow, was facing financial challenges and could be faced with being yanked off its BSP programme by IATA. Sources informed us that the company has been ravaged by a combination of high operating costs, restriction on repatriation of forex, and the depreciation of the naira. These affected the company’s financial situation leading them to reduce overheads and lay off some of their workers. We also understand that they are urgently looking to raise funds and are considering a likely merger or acquisition with South Africa’s TravelStart. Another report tracked during the week revealed that Wakanow announced a “transition from a 2-week airline billing settlement cycle, to pioneer a daily direct remittance and prepaid card payment”. This in other words means, travellers hoping to use Wakanow will now have to pay for their tickets same day as against having a 2 week period to settle payments. This further buttresses our article as banks have refused to provide Wakanow with the guarantees it would need to continue with the BSP programme.
STILL ON THE TRAVEL SECTOR
The situation at Wakanow probably highlights a greater problem in the aviation sector as we understand that most travel agencies are facing challenges meeting up with their payment obligations to airlines as well as to IATA. Sources also indicate that Leadway Assurance, which provided most of the insurance covers that has enabled the BSP programme to function is also considering pulling out if the default rates continue to spike. The larger problem we see here is the snuffing of liquidity which a lack of credit could cause to the sector. You will be wise to review your credit policies with players in this industry.
RICH? NEED A US CITIZENSHIP?
Nigerians looking for a path to Citizenship in the US have various options that they can use. One of them is the fifth employment-based preference (EB-5) immigrant visa category for qualified foreign investors seeking to invest in a business that benefits the U.S. economy by creating or preserving at least 10 full-time jobs. To be a part of this, you will need to invest a minimum of $500k USD in the US. This path is obviously not for the average Joe; however, just in case you know someone then this might be useful. Nigerian real estate investment firm, 3INVEST, has said that commencement of development work on a 20 storey prime real estate in Texas that will include 162 guestrooms and 58-residence is underway. The ambience features 15,000 square feet of riverfront meeting space and a Skybar Club, providing sweeping views of the city. The project cost a whopping $116 million, and will sit on 337,000 square-foot of land; it is also being developed as a mixed-use property. The managing director of 3INVEST, Ruth Obih said the project will be concluded in 2019. The project is called the Thompson San Antonio Hotel and the Arts Residence and is being promoted by Houston EBS. The company’s chief executive is a young Nigerian by the name of Acho Azukie. By the way, Ruth Obih is also in her 30’s and started this company in 2007. You probably listen to their shows on air on radio.
BANKS AND PHONES
Sterling Bank shares are up by 161% in the last 1 year. The stock joins the league of tier 2 stocks that have done quite well in the last 1 year. However, the company was in the news for something different. The bank announced that it has partnered with 9Mobile and Solo Phones to introduce a contract smartphone pre-bundled with mobile plans to new and existing customers of the bank. Maybe I am wrong, but this looks like the first of its kind for GSM phones in Nigeria. I believe Solo Phones also has a similar partnership with Airtel Nigeria.
The contract package comes with a monthly mobile bundle plan (Voice +SMS+ Data plan + Social media+ Recharge bonuses) in addition to a SOLO Aspire 4 smart mobile phone and the minimum period for the contract is 12 months. Airtel’s deal comes with a SOLO aspire M smartphone and will cost a monthly rental of N4,150. SOLO was formed in 2012 by a group of highly experienced telecommunication professionals, led by Tayo Ogundipe, a Nigerian-born, former senior global executive with HTC and Sony Ericsson.
OANDO AND MANGAL SCORE TRUCE
The never-ending story of Oando took another twist last week after it announced that it had reached a “Peace Accord” with Alhaji Mangal, one of the shareholders who petitioned against the oil giant. Recall, that Alhaji Mangal alongside Volipi’s Ansbury accused the company of financial impropriety and demanded SEC investigations. Oando countered that Alhaji Mangal had breached an SEC provision by not disclosing that he has over 5% equity in the company.
Adewale Tinubu(Left), Sanusi Lamido Sanusi(Middle), Alhaji Mangal(Right)
The “Peace Accord” (perhaps there was a war), the company claimed, was facilitated by the Emir of Kano (you know who). Alhaji Mangal said Oando had addressed the issues he had in the petition while Oando offered him a seat on the board. If you know Oando very well, you will understand that getting a board seat there is like passing a camel through the eye of a needle. SEC, by the way, insists that it will carry on with its investigations. We all know how all this will end don’t we?
THE DANGOTE EMPIRE KEEPS GETTING BIGGER
Africa’s richest man has once again pulled off another major deal for his empire. The Kano state government gave Dangote Group over 150 hectares of land for the development of the $150m Dangote/Black Rhino solar power plant in Zakirai, Gabasawa local government area of the state. The land is for the provision of 100 megawatts (MW) of solar power plant and is expected to be completed within two years. Haters, don’t hate.
Fidelity Bank to raise N50 billion in bonds in Q4 to refinance existing debts
The new issue will be made to redeem the existing N30 billion bond which was issued at 16.48%.
One of Nigeria’s second-tier commercial banks, Fidelity Bank Plc, has concluded plans to issue up to N50 billion ($131.3 million) in local bonds by the fourth quarter of 2020, in order to refinance existing debts as the yields drop.
The disclosure was made by the Chief Operations and Information Officer, Gbolahan Joshua, during an analyst call on Tuesday, September 8, 2020.
The crash of crude oil price globally, which was triggered by the novel coronavirus pandemic, has led to a decline in bond yields on the local debt market. This has made foreign investors to dump their local assets, leaving excess liquidity in the money market. This has also put a lot of pressure on the foreign exchange market as they look for dollars to repatriate their funds.
The Fidelity Bank top executive disclosed that the new issue will be made to redeem the existing N30 billion bond which was issued at 16.48%.
The global economic situation has seen yields in the debt market drop from as high as 18% about 3 years ago to less than 5% for the one-year treasury bill.
Fidelity Bank had revealed that it expected to see a 15% drop in profit this year when compared to 2019 result due to the coronavirus pandemic. Its profit after tax increased by 21.9% to N12 billion for the half-year 2020.
The second-tier bank also disclosed that its income declined in the second quarter due to a downward review of lending rates on loans as a result of the economic downturn.
Heineken buys more units of Nigerian Breweries Plc
The Dutch firm has invested N276 million in NB since August, to increase its stake in the Brewer by 0.10%.
The major shareholder of the largest brewer in Nigeria, Heineken Brouwerijen B.V, has increased its stake in Nigerian Breweries, with the purchase of 233,110 additional units of Nigerian Breweries shares. This was disclosed by the company in a notification sent to the Nigerian Stock Exchange, which was seen by Nairametrics.
According to the notification, which was signed by the Company’s Secretary, Uaboi G. Agbebaku, the purchase was made on the bourse over two transactions on the 2nd and 3rd of September.
This disclosure is a regulatory requirement that must be reported to the Nigerian Stock Exchange, especially when a major shareholder or director of a publicly quoted company purchases shares in the company they own.
The analysis of these transactions indicates that the purchase consideration for the 233,110 additional units of Nigeria Breweries shares at an average price of N39.94 is put at N9.3 million.
This purchase and previous purchases further cement Heineken Brouwerijen B.V’s status as a major shareholder; the company has accumulated a total of 7,720,236 since 30th June.
As of June 30th, when Nigerian Breweries released its Half-year financial results and reviewed its shareholding pattern, the company had exactly 7,996,902,051 outstanding shares, with Heineken Brouwerijen B.V being the majority shareholder with 3,019,363,804 units, which amount to 37.76% of the total shares of the company outstanding.
Hence, with the current purchase of 233,110 additional units, and previous purchases in August and September 1, which amount to 7,487,126 units, Heineken’s ownership percentage of Nigeria Breweries is now put at 37.85%.
Insider transactions, both sales and purchases, are often an indication of how shareholders perceive a company’s valuation. It could also mean a possible capital raise or that the majority shareholders are strengthening their existing holdings.
In like manners, the purchase of the shares of Nigerian Breweries by Heineken and other majority shareholder has mopped up stray volumes on the bourse, and pushed the stock price higher by 29% or N9, from N31 it closed at on the 3rd of August to its current value of N40 with 38.2x earnings.
About the company
Nigerian breweries is the largest brewing company in Nigeria. It engages in the brewing and marketing of lager beer, stout and non-alcoholic malt drinks, and the bottling of the Schweppes range of soft drinks and Crush Orange. Its brands include Star, Gulder, Legend, Heineken, Maltina, Amstel Malta, Fayrouz, Climax, Goldberg, Malta Gold, and Life. These products are mainly sold in Nigeria and other neighbouring countries.
Key takes on NB’s financials
Nigerian Breweries was affected by the disruption in the global and domestic demand and supply chain, as profit after tax of the largest brewer dropped by as much as 58%, at the back of the adverse impact of the sharp contraction in economic activities.
The knock-on effect of the COVID-19 lockdown, which affected the trade segment of the business, affected the company sales and this triggered the 11% drop in revenue in the first half of the year.
Nestle’s parent company increases stakes in Nestle Nigeria in August
The purchase consideration for the 748,047 additional shares at an average price of N1,174.74 is put at N878.8 million.
Nestle S.A, Switzerland, the parent company of Nestle Nigeria Plc and the majority shareholder of the company, has increased its stake in the Nigerian subsidiary, as it purchased about 748,047 additional shares in August.
This was disclosed by the company in a notification sent to the Nigerian Stock Exchange, which is seen by Nairametrics.
This disclosure is a regulatory requirement which must be reported to the Nigerian Stock Exchange, especially when a major shareholder or director of a publicly quoted company purchases shares in the company they own.
The analysis of this development shows that the purchase consideration for the 748,047 additional shares at an average price of N1,174.74 is put at N878.8 million.
Importantly, this purchase increases the ownership percentage of Nestle S.A, this adds significantly to the multinational’s investment in the company as the parent company now owns 66.27% of Nestle Nigeria Plc.
The 66.27% ownership share of Nestle S.A. total amounts to 525, 307, 504 ordinary shares worth N617 billion out of the 792, 656, 252 shares outstanding.
Meanwhile, insiders’ transactions both sales and purchases are often an indication of how shareholders perceive the company’s valuation. It could also mean a possible capital raise or the majority shareholders strengthening their existing holdings.
About the company
Nestlé Nigeria PLC is one of the largest food and beverage companies in Africa. Nestlé Nigeria Plc engages in the manufacturing, marketing and distribution of food products including purified water. It also exports some of its products to other countries within Africa.
It has three product segments: Food, Beverages and seasoning. The Food segment engages in the production and sale of Cerelac, Nutrend, Nan, Lactogen and Golden Morn. The Beverages segment engages in the production and sale of Milo, Chocomilo, Nido, Nescafe and Nestlé Pure Life. While the seasoning segment engages in the sale of Maggi cubes.
Key takes on Nestle financials
Nairametrics had earlier published after perusing through the company’s half-year unaudited financial report that the increase in the cost of sales, Administrative expenses, low finance income coupled with high costs coloured the bottom line of the company as earnings per share dipped from N33.11 to N27.53.
This shows the knock-on-effect of the pandemic on a giant like Nestle, despite grappling hard to keep revenues flat year on year, the increase in key costs still ebbed earnings.