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NASCON’s Unimpressive Revenue Impairs Bottom-Line Performance

NASCON Allied Industries Plc reported FY2018 revenue of NGN25.77bn, which represents a 4.78% decline from the NGN27.06bn recorded in the previous year.



NASCON’s Q1:2019 financial result

Operating Challenges Weaken Revenue: NASCON Allied Industries Plc reported FY2018 revenue of NGN25.77bn, which represents a 4.78% decline from the NGN27.06bn recorded in the previous year. This was due to the weaker contribution from the sales of salt, which constitutes 80.57% of the company’s topline while its tomato processing and vegetable oil plants lay idle. However, the revenue from its seasoning products and freight business grew by 20.76% and 5.84% respectively, with the latter accounting for 15.85% of total revenue.

In 2019, production is set to resume on the company’s tomato processing plant following its strategic decision to focus on backward integration for the supply of raw materials, along with the resolution of its disagreement with local farmers over pricing of tomatoes. We also expect the company to benefit from the planned ban on the importation of tomato paste by the FG. However, the contribution from this business segment should be modest; the difficulty in stemming the inflow of smuggled products through the country’s porous
borders as well as anticipated shortfalls in supply as local farmers adapt to the improved seedlings to be supplied by NASCON. Hence, we estimate revenue to grow by 5.0% to NGN27.05bn by FY2019. The company’s backward integration plan for the vegetable oil segment has a longer gestation period and is not expected to add to revenue in 2019.

Sticky Costs Structure Impairs Profit Margins: The decline in revenue pressured the gross margin, which contracted to 30.19% from 36.93% in FY2017, but this was worsened by the 5.38% rise in the cost of sales. Operating expenses also spiked by 13.48% to NGN2.70bn (vs. NGN2.38bn in 2017), the highest in a decade. Consequently, Profit before Tax and Profit after Tax dropped by 18.46% and 17.28% respectively. Net margin also declined by 3.20%, slightly underperforming a 5-year median of 16.30%.

Operating Accruals Underscores Poor Earnings Quality: NASCON generated NGN0.99bn in cash from its operating activities, barely 22.00% of its net income for the period. This underscores poor earnings quality for the year and raises the possibility of future negative earnings surprises.

Value Creation Constrained by Lower Asset Turnover: Return on equity dropped sharply from 50.95% in FY2017 to 33.51%, slightly below its five-year average of 35.59%. This was largely due to decreased asset utilization over the financial year, as asset turnover fell to 0.85x, lower than a seven-year average of 0.97x. Similarly, the return on asset weakened for the period at 12.97% (vs.16.56% in the previous year).

Recommendation: Our target price was reviewed downwards to NGN17.86
given lower expected EPS of NGN1.52 (vs. previous estimate of NGN2.19) and a
target PE of 11.75x. This gives a downside potential of 6.66% to its closing price
of NGN19.05 on the 16th of April. We therefore rate as HOLD.

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Investment Banking/Meristem Capital Limited
[email protected] (+234 806 011 0856)
[email protected] (+234 808 536 5766)

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Sigma Pensions

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Why the proposed Borno power plant may not materialise 

The glaring security challenge cannot be overlooked in considering a major power plant project in Borno State.



Only a few days ago, the Group Managing Director of the Nigerian National Petroleum Corporation (NNPC), Mele Kyari, led a delegation to Borno State to meet with the Governor of the State, Babagana Zulum.

In the conversation with Zulum, Kyari promised the establishment of a gas-fired power plant in Borno State within a maximum of 4 months to solve the recent blackouts that resulted from insurgents cutting off Borno from the national grid since January this year.

In Kyari’s words, “We have talked to each other and we think it’s very possible to establish a dedicated power plant in Maiduguri which will serve current needs of power supply not only in Maiduguri but to other parts of the neighbouring cities.”

Yet, there is a significant possibility that the power plant promised by Kyari may not materialize for many reasons, the first of which is security. In the meeting with Kyari, Governor Zulum had noted: “The ongoing insurgency has cut off the entire Borno from the national grid in the last three months. We put all our efforts and restored it back… but unfortunately, after 48 hours, the same group of insurgents went back and destroyed the main tower again.”

This glaring security challenge cannot be overlooked in considering a major power plant project in Borno State, particularly noting that the State and its surrounding communities have been the hot zone of insurgent and terrorist attacks by Boko Haram insurgents since 2009. Borno, Yobe and Adamawa have particularly been states where the insurgents have set up shop and carried out various activities, including kidnap, extermination of entire communities, burning of markets and religious buildings and the attack on the United Nations compound, in each case claiming tens or hundreds of innocent lives.

One report reveals that at least 37, 500 people have been killed by the insurgent group since May 2011, a modest number, some say. Also, till date, some of the secondary school girls kidnapped in the April 2014 Chibok incident are yet to be returned to their families. It is then bewildering how Kyari intends to see to the construction and operationalizing of this gas power plant.

Additionally, while the Minister of Petroleum for State, Chief Timipre Sylva, announced last year about the discovery of oil and gas deposits in the North, we have not seen any exploration and production kick-off. It then begs the question of where the gas for the Borno power plant intends to be sourced. The only gas pipeline that runs through the North – the AKK- is still in its first phase of construction out of three phases and has been earmarked at the earliest, to be completed in 2023 – not counting the typical delays the project will experience along the way.

Should the AKK by some stroke of luck materialize much earlier than the target date, the pipeline route is a considerable distance from Borno. It runs the route of Ajaokuta-Abuja-Katsina-Kano, its endpoint, a striking 481km from Borno State. Thus, there would have to be construction of a tie-in pipeline almost as long as the AKK from Kano to Borno State to get gas to Borno.

Sigma Pensions

Optimists may reference the oil and gas discovery in the North and how production may start soon, thus obliterating the need for a 481km pipeline. This optimism however is not well-founded, as insecurity has been shown to be a major risk to oil and gas projects everywhere in the world. One of the major reasons the Trans-Saharan Gas Pipeline proposed to run from Nigeria to Algeria was abandoned was due to security challenges posed by Nigeria’s Movement for the Emancipation of the Niger Delta (MEND), the Tuareg guerilla movement in Niger and other insurgent groups along the proposed route of the pipeline.

These increased the risks across board, including for completion and operations through the lifecycle of the project. As such, failing to fix the security threats in northeast Nigeria makes any proposed gas plant project a pipe dream. Transporting gas via LNG trucks is not a better option, given that the drivers and their cargoes would be in danger of being kidnapped, shot at or bombed. The risks for both personnel and investors are high.

In any event, promising a power plant in 4 months for the people of Borno is unconscionable, since a typical gas power plant will take between 1 to 6 years to construct in relatively peaceful regions. What the government needs to do instead of making promises it cannot keep is to work arduously to fix the security challenges in Northern Nigeria and at the same time consider using decentralised solar power to provide power supply to homes, government institutions, schools and businesses while plans to produce gas in the region or transport gas to it are underway.

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Lagos Commissioner of Police dismantles road blocks on Lagos-Badagry expressway

The Commissioner warned the concerned Area Commanders to take action on full compliance as any defaulter will be sanctioned accordingly.



The Commissioner of Police in Lagos State, CP Hakeem Odumosu, has ordered the immediate dismantling of all illegal roadblocks by police teams from the command on the Lagos-Badagry expressway.

The directive is to checkmate the illegal activities of the police on that route which have been condemned by the government, some stakeholders and international bodies and also bring sanity and decency to their operations along that axis.

That disclosure is contained in a statement signed by the Police Public Relations Officer of the Lagos State Police Command, CSP Olumuyiwa Adejobi, on Saturday, April 10, 2021.

Adejobi in the statement said that CP Odumosu gave the order on Friday while addressing Area Commanders and Divisional Police Officers in the command on the general security situation in the state and reviewing the anti-crime strategies of the command in order to sustain its feats on crime control.

What the statement from the Lagos State Police Command is saying

The statement from the Lagos Police Command partly reads, “In his bid to restore sanity and decency to the operations of the police along the ever-busy international route, Lagos/Badargy Expressway, the Commissioner of Police, Lagos State, CP Hakeem Odumosu, has ordered for the immediate dismantling of illegal roadblocks by the police teams from the Lagos State Police Command.

The police boss, while reacting to some complaints from the general public and some security reports on the police activities along the international route, ordered the Area Commanders and Divisional Police Officers whose jurisdictions fall along the Badargy Expressway; Festac and Area K, Marogbo, to withdraw their men from the illegal roadblocks and embark on aggressive motorised patrol and surveillance to police their areas and the route.

The Commissioner of Police confirmed that the illegal police roadblocks along the route have been condemned by the government, international bodies and interest groups and they must be dismantled without delay,” he said.

The Commissioner, however, noted that other police operatives from other police formations, outside the supervision of the Lagos State Police Command who operate along the route, would be contacted to adjust and do the needful to restore sanity to their operations.

Sigma Pensions

The CP Odumosu then warned the concerned Area Commanders to desist and take necessary action on full compliance with his order as any defaulter will be sanctioned accordingly.


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