The Chief Executive Officer of Ellah Lakes Plc, Chuka Mordi, and the company’s Agronomist Jamie Rixton, recently visited Nairametrics’ Head Office in Lagos to discuss the details of the acquisition of Telluria Limited by Ellah Lakes Plc.
Chuka Mordi and Jamie Rixton also discussed his aggressive growth target, as well as the impact of the company’s oil palm field on host communities.
See the details of the conversation below.
Ellah Lakes Plc recently held a “facts behind the listing” presentation on the Nigerian Stock Exchange. What prompted the decision?
Mordi: For a variety of reasons, the growth projectory that we have planned out is going to involve a significant amount of CAPEX for the next few years. The capital market is a prevailing place to get equity as well as get the public involved. From the point of view of corporate government transfers, it gives us a degree of visibility that we think is useful for the capital market from a basic point of view. The rapidly growing Nigerian Stock Exchange is a very healthy platform to be on.
Why Ellah Lakes? Obviously, Telluria Limited had the most progress. Therefore, one would think it would rather just grow organically?
Mordi: I would probably characterise it differently. Ellah Lakes has the history of financial difficulty brought about by externalities beyond their control and their operating environment and they saw in us an opportunity to diversify the structure of the business. It involves getting to the listing by a faster route while an introduction to the tech in another 12 months.
We have to do historicals of the last 3 years but we only need to establish ourselves. So far, we invested significantly over the last year. It was a faster route to market. I think its synergy for both sides.
Ellah Lakes’ acquisition of Telluria was unprecedented. What prompted this move?
Mordi: It’s purely an issue of financial structuring; it was the optimal way to structure it in order to have market access. So it’s effectively an ITO. It was a structuring situation that was convenient for both sides.
They couldn’t afford to pay us in cash, so they paid in equity. The equity payout meant we took a majority position in the firm that was acquiring. What it does is, it still leaves a certain value for Ellah Lakes’ shareholders, but it also creates certain value for shareholders of Telluria that is commensurate with various positions.
So what is Telluria’s stake in Ellah Lakes?
Mordi: The delusion is 95 to 5% delusion. However, there’s a variety of other stakeholders in Telluria also, so we only need another 10% to get to the agreed free float requirement with the Stock Exchange. We had an agreement with the Stock Exchange to do it in the next quarter. We are probably going to do it before then because it’s a listed company and the liquidity will drive people to diversify their holdings.
In the last count, we had just over 2000 shareholders in Ellah Lakes. The expectation is as the success story becomes known, we would expand our shareholding base, which is what we want to happen. We want to get the Nigerian public to participate in the Ellah Lakes great story, which I think is a proxy to the Nigerian Agric business growth story as we diversify going forward.
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From the presentation of the fact behind the listing, you have N3.6 billion debt?
Mordi: That’s a year-end number. Some of it has been raised but because the Ellah Lakes year-end is the 31st of July and the approval was given by SEC just before the last quarter, we cannot publicly consolidate Telluria’s and Ellah Lakes’ books until we do the year-end number.
The year-end is July 31, 2019, we will come out with our year-end figures very quickly because we run a very tight operation. Anyway, that’s why that number at the end is a consolidated number that we can’t show the actual figures until we release a consolidated Telluria/Ellah Lakes July 31 year-end (figures). By then, we will harmonise and give you the actual figure.
What’s your aggressive growth target for Ellah Lakes in the next 18 to 24 months?
Mordi: We have a fairly aggressive land-bank acquisition plan. We are on course to achieve everything that we projected. So, I think we are quite happy with that. Obviously, what we are cultivating, our projections is in tandem with the amount of land that we’ve achieved in our land-bank… that’s an obvious correlation between what we are cultivating and what we’ve banked.
If we reach our target for the land-bank, then we reach our cultivation target; and it means we can accelerate our growth towards million and million refining capacity. Ultimately, we want to be an industrial agric business, we don’t want to be in business of selling crude palm oil, that has its value of course, but I think we want to get to the refining stages as quickly as possible; industrial products for your everyday household goods.
Also, like I’ve said, along the line, we would be optimistic, so if we see any opportunities that are in line with our long-term strategy, we would aggressively pursue them.
Do you have plans for rubber?
Jamie: At this stage, no. But in any farming operation, we are always looking for opportunities. Just because we are doing oil palm today doesn’t mean we gonna do oil palm in other parts of the land. Land is like, if you can find a niche, that’s the metro of farming.
Mordi: I think I can also answer that from a slightly different point of view. Even though we have a five-year strategy, it includes an optimistic outlook. So if we see an opportunity to scale up the business and increase our money, we will gladly explore it.
What happens next when Nigeria is fully sufficient?
Mordi: When you say self-sufficiency, the question is self-sufficiency in what? If you produce enough oil palm, you get crude palm oil, which is purely for cooking; that’s your basic need. So, you can achieve self-sufficiency in just consumption of crude palm oil. But you know there’s other aspect in terms of what you use it for like Industrial needs; additives for noodles, additives for chocolate, additives for biscuit, refining for cooking oil.
I think if there are economic growth and development, it drives consumption on a variety of level, so there will still be consumption on basic edible level, but also if we grow industrially, and we have higher value-added products, there’s scope for even more growth in utilization of oil palm and palm oil derivatives.
So if we carry on growing (population), we would have to grow the oil palm (output) in order to catch up with the Nigerian industrial growth, because you can have the population growth which will drive up the consumption of the edible item and you will also have the industrial growth or economic growth added to that.
So I think the self-sufficiency level is quite far away, it’s not a five-year framework that will get us there, because as we keep expanding, supply and demand will probably grow, and I don’t think we would still have enough supply because the Industrial growth will drive demand also.
Jamie: There’s also adaptability. During a company’s journey, there will be many variables confronted with. Our success as a business is based on our ability to adapt, and that’s where we believe we have the team to be able to do that.
There are lots of palm oil plantations in Edo and Delta. What is it about these two states that attract businesses?
Mordi: In the Nigerian aspect, we fall between Edo state and Delta state so the local primitives are in both states, that’s why we emphasize on them, which is part of the palm states.
Jamie: I think the big attraction for both states is because so much is happening there and the conditions are ideal for operations. One of the challenges in Nigeria since 2014 is that so many crops have grown in the wrong geographical areas, one of the reasons why the average of rice and cassava may be the new alert which people don’t often understand how the importance of Agriculture. Added to it, Agriculture is many variables to give you the best chance in order to get you the good crop.
There has often been disagreement between private companies and host communities. How did you compensate them?
Mordi: We have a very sensible CSR framework. Rather than use consultants to share money, we engage directly with the two main communities in the area, Igwelaba, which is in Orion Local Government area in Edo state. So we visited extensively before we started, coopted them into the process so they understood what we are doing. So they are providing security, maintenance on the farm and no one is being handed any free money, so it’s simply you have to add value in some ways.
Does this get to create jobs?
Mordi: Of course, in every area, I’ve spoken about. There’s no free money to hand out. I think they recognize if they participate in the growth of what we are doing, they can also participate in our success, and that’s on the Edo side. On Mokosa side, which is the Delta State community, we do exactly the same thing in parallel, so we are sharing the opportunities between the communities equally.
So on the security side, maintenance side, on the health side, Nurses, Doctors, in trying to help the schools that they want, some CSR work; we are also doing that equally between both communities. But it’s fundamentally about direct engagement with them and them participating in our growth story so they understand exactly what we are doing.
Round the corner (of Ellah Lakes’ oil palm field) is OBEN gas plant and Seplat. I think we have a lot of engagement early on to make them recognize this is an Agric business, it’s not oil, we are not going to hand out sub-ventures on a weekly bases because we are not an oil company.
But I think it was very important to make them realise that, so they can engage with you properly because if they have a misunderstanding about what you do, they would queue up at your gate and say find us something. You know, we don’t have that kind of business where we can do that. So I think it was very important that we engaged them directly very early before we start cultivating so they understood the nature of our growth trajectory.
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Jamie: It’s also about sustainability. We want to be sustainable not just in terms of how we go about clearing land and how we do our operation, but also sustainable for the local community because, honestly, we cannot do without them let’s be very frank.
I’ve seen it time and time again with big companies all over Africa. I’ve worked in Africa for the last 20-years, and since 2014 here in Nigeria, you’ve seen those mistakes others have made, and those mistakes are the lack of engagement with the local communities; they allow one guy to do the negotiation, and they’ve all got agendas.
So, for us, we are engaging directly, our cards are on the table, and we are telling them what we are going to do, and that’s appreciated, and if there’s any sort of issue, they can talk to us, it’s that simple; as far as the community, we believe they are a crucial asset to our business.
Do you have issues getting the right personnel from the community and what are the plans for manpower development?
Jamie: I think it’s down to a company’s attitude towards the people. Obviously, you have to train whoever you bring on board, you have to train. And this all comes back to the local community, with that community, there are people who are very willing, able and smart and able to learn. Now obviously, in the initial stage, as we are building, they are building their own capacity as we are moving forward.
Of course we can find people from outside the States, but we would rather be looking internally and at the local communities to see where we can fit in, where we can find good (skilled) people, and they are there; I mean it’s just a matter of how we grow with them and not have the mistakes that others have had in the past – of the larger companies that put their hands in and say they can’t find people.
For me, that’s about being able to build your capacity and the capacity of your people.
Mordi: I will like to add to that and say, there’s obviously a deficit of skilled manpower in Nigeria that’s something the government policies will have to work on from investment and education perspective. There are some externalities beyond our control, the pool of manpower available to us at a certain skill level is not something you can do anything about, except training people that we hire.
But the job market is what the job market is; the pool out there is just what you can choose from, so it’s just a situation we have to manage as best as we can.
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What are the qualities you look out for when hiring?
Jamie: Passion, commonsense and interest in what you are doing, because there are so many people out there doing what they are not interested in. You have to look for someone who has the passion and interest in what you are doing and that’s the person you can train.
I’ve been involved in training for over the last 20-years, I promise you, if you got people who aren’t interested, it’s never going to get well no matter how their CV looks.
Mordi: I will go with the first two (Passion and common sense), then the third, I will substitute with the willingness to work hard. If you are interested, if you care deeply, but not willing to work hard, it’s just not going to be possible.
People have to realise life is difficult and you have to apply yourself. From time to time, you are going to fail at what you are doing, and failure isn’t necessarily a bad thing if one learns from those mistakes. Once you’ve failed, pull yourself back up, dust yourself and carry on; it is that willingness to work hard. But there are too many people who at the first defeat, they give up and try something else.
Trying something else is not bad, but if you’ve really want something you have to be willing to put your mind to it and keep on grinding. It doesn’t come naturally, it can only come from trying and failing and recognizing that failure isn’t a bad thing, you just have to be willing to (continue).
How many jobs has the oil palm field created and how many will it create for the communities?
Jamie: We bring people on as we need and you can’t put a number on it. But we would be creating significant jobs over the coming years, we support the local communities by finding such people in the communities.