Welcome to Corporate News roundup for the week ended August 24, 2018. Corporate News roundup is a weekly roundup of corporate news and action that took place the previous.
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DStv was a major feature in the news last week. Justice Nnamdi Dimgba of the Federal High Court sitting in Abuja, last week granted an interim injunction halting the hike in DStv subscription rate by MultiChoice Nigeria Limited. Following the court’s injunction, Nigerians have come out en masse reacting to the news.
As some expressed gratitude to the Consumer Protection Council (CPC), a regulatory body that challenged DStv’s subscription hike, others sounded a note of caution. So what is the bone of contention here? In July, MultiChoice raised the subscription rate for the DSTV Premium package from N14,700 to N15,800, Compact Plus from N9,900 to N10,650, Compact from N6,300 to N6,800, Family from N3,800 to N4,000, and Access from N1,900 to N2,000. The judge then granted a motion restraining DStv from implementing the new rates.
Well, DStv is obviously not obeying this order even though it is yet to issue an official comment. According to it, the court documents have just been received and are currently being reviewed. I get that this is a populist decision, but we have to be careful about the government trying to fix prices. I am no judge or lawyer, but DStv is not a monopoly, so I do not see a basis for trying to set prices for it.
While the news of the injunction raged on social media, Multichoice unveiled DStv Now, an internet-based service with live sports, live TV shows and movies on Catch Up. According to the company, the app is now available for Samsung smart TVs (selected models from 2015 onwards), Apple TV (fourth generation & newer) and media players running Android TV (Google certified devices only) Apps are also expected to be added shortly for additional brands of smart TVs (sorry no LG for now).
This looks like an attempt to compete with Netflix which launched in Nigeria about two years ago. Unlike DStv, Netflix offers several original exclusive contents which DStv does not. However, DStv has a lot more content which is exclusive to it and not available to Netflix subscribers. Content such as sports, music, movie channels and even some series.
In all this, it appears that the internet service providers will be the winners. Why would anyone with a decoder want to stream DStv on TV?
Still on DStv, rival (allow me to use that term), TStv reported that it is teaming up with NigComSat to take on DStv. Apparently, TStv and NigComSat have an active agreement with China Great Wall Industry Corporation (CGWIC) for Direct-to-Home (DTH) services and are putting a “common front to tackle competitions.”
According to reports, “the NigComSat DTH system is capable of providing commercial broadcasting services to Nigeria and all countries within its coverage, from Senegal in the West to Namibia in the South.” They claim that this helps TStv air over 100 TV channels.
Last week, MTN confirmed the appointment of Mazen Mroue as its new Chief Operating Officer (COO). Mroue’s appointment took effect from August 6, 2018. Mroue joins MTN Nigeria from MTN Irancell, where he had also served as COO since July 2014. His appointment could be viewed as a step closer towards the impending IPO scheduled for sometime next year. By the way, MTN also denied that it planned to sell its stake in Jumia.
Still on MTN, the company reported during the week that it has made a slight readjustment to its business model by focusing less on investment in voice facilities and more on data facilities.
According to MTN’s General Manager for Corporate Treasury Finances, Mr. Ishmael Nwokocha, who recently made this disclosure in Lagos, much of the N180 billion earmarked for the company’s Capex in 2018 was geared towards network expansion/upgrade and optimisation for data.
This, he said, is part of the company’s effort to meet its subscribers’ increasing demand for data. MTN spent N192 billion, and N225 billion in 2016 and 2017 on Capex, most of which went to data-driven network expansion. This is obviously a no-brainer, seeing how much MTN made from data. MTN Nigeria’s data revenue was up by 64% to N79billion (R3.1b) in the 6 months ending June 2018.
Dangote Cement to extend clinker export to other African countries
Dangote is on course to sell more clinker across West Africa and commence shipment to Central Africa in H2 2020.
The Management of Africa’s largest cement producer, Dangote Cement Plc (DCP), disclosed during a virtual event yesterday, that the cement producer is set to commence clinker export to other African countries within the next few weeks.
The Acting Group CFO, Guillaume Moyen, made this known in his presentation at the joint virtual event with NSE, tagged “Facts Behind the Figures and Sustainability report’’ on Wednesday, 24th September, 2020.
Backstory: In its half-year report, the Management of Dangote disclosed that on 12 June 2020, the maiden shipment of 27.8Kt of clinker from Nigeria to Senegal left the Apapa Export Terminal.
The Management reiterated that the company is on course to sell more clinker across West Africa, and commence shipment to Central Africa in H2 2020. As it is in line with the Group’s vision of making West and Central Africa, cement and clinker independent, with Nigeria the main export hub.
The absence of limestone in much of West Africa, especially those in the coastal states, forces those countries to import bulk cement and clinker from Asia and Europe, and this is quite expensive.
However, Dangote Cement plans an ‘export–to–import’ strategy, positioning Nigeria as the main export hub of the continent, in a bid to serve West and Central Africa countries from Nigerian factories, making the region cement and clinker independent.
This is consistent with the Group’s vision of cementing Africa’s economic independence, as this would lead to lower clinker cost for pan-African operations, due to the proximity of Nigeria to these countries, as clinker landing cost will be cheaper.
The Management emphasized that this is possible, as Nigeria can serve a potential market of 15 countries, with over 350 million people, given the county’s relative abundance of quality limestone, especially in key Southern regions.
It is important to note that DCP’s clinker volume, according to figures contained in its H1 2020 results, has increased to 60Kt from 12kt in H1 2019, which translates to 400% increase.
The benefits of DCP’s export strategy
It is noteworthy that the innovative strategy of Dangote Cement Plc is expected to;
- Cement Africa’s economic independence, and contribute to the improvement of continental, regional, and intra-regional trade, as the company seeks to make regional and continental free trade agreement a reality.
- Ensure that the increase in production due to exports, leads to increase in capacity utilization in the Nigerian operation, and in turn, reduces fixed cost per tonnes.
- Increase foreign revenue exchange for the Nigerian operation, and offset foreign exchange risks.
- Reduce clinker landing cost, by leveraging on the proximity of Nigeria to other African countries.
Some of the benefits of our export strategy are Higher capacity utilization of our facilities; Ecowas benefits; Foreign exchange; and Lower clinker cost for Pan-Africa operations – @guillaumemoyen
#NSEhostsDangote https://t.co/TGd2N6JGZw pic.twitter.com/TvPGHunsb0
— The Nigerian Stock Exchange (@nsenigeria) September 23, 2020
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.