For more than 15 years, X-Pression enjoyed huge demand in Europe and America. X-Pression’s growth was driven by its market positioning, suited to all classes regardless of pocket size. But this one-time ‘goldmine’ is now struggling to stand on its feet.
Manufactured by Solpia Nigeria Limited and sister-company, Linda Manufacturing Company Limited, X-Pression is the most popular hair extension brand in Nigeria with attachment and weave-on types. It is the revenue driver for Solpia and Linda despite the array of other products produced by them.
X-Pression was a source of pride to Nigeria and Africa at large, as though rooted in Africa, its branches spread across Europe and America, as demand surged. Despite being an African company, its revenue is driven by demand in Europe and America.
Nigeria is the problem of X-Pression
The beginning of a decline-: The companies began to hit financial difficulties about two years ago when export to its major markets, Europe and America, began to drop due to a fall in demand. Buyers of X-Pression started seeking alternative hair products because Solpia couldn’t meet demand on time.
This failure was mainly because of a failed system in Nigeria’s port. The raw materials for manufacturing X-Pression are sourced from Japan and Malaysia. Purchasing these raw materials was not a problem, but getting them across Nigeria’s port was like passing a camel through the eye of a needle.
While the European and American buyers expect to receive the X-Pression products within one month after demand, the raw materials take six months to leave the port. Nairametrics had previously reported how extortion by NPA officials and task force – comprised of Navy officials, Custom, Civil Defence and Army– stationed at Apapa port road, is behind the gridlock and delay of loading goods at the port.
“What is affecting us right now is mainly the port congestion and the unfriendly atmosphere of the economy in Nigeria now.
“And most times, our raw materials are stuck at the port, sometimes for six months, they will not come out. And you can’t produce if you do not have raw materials to produce.” Azubuike Onyekwelu, X-Pression’s company secretary, told Nairametrics in an interview.
That was how X-Pression lost its revenue driver. The port delay caused export to fall drastically within a short period. That was the beginning of the financial problems of Solpia and Linda. X-Pression’s biggest markets have resorted to alternatives due to untimely supply.
“It dropped by 80% to 90%. Because most times, when people in America or Italy place order for goods, they expect you to supply within a month, but due to the fact that we don’t have raw materials to produce items required by them, they have to seek out alternative,” Onyekwelu disclosed.
African market doesn’t offer much help
Presently, Nigeria is the goliath standing between X-Pression and its revenue driver. Asides the port which has been the bane of most manufacturers in Nigeria, the closure of land borders has also blocked Solpia’s alternative revenue source.
While X-Pression is only exported to Europe and America, buyers from other African countries come to Nigeria to purchase its products from the companies’ distributors and export to their countries. Although Onyekwelu said the revenue generated from the Nigerian and African market is nothing compared to the western markets, it still provides a soft landing for them.
According to him, buyers from Cotonou, Togo, Ivory Coast, Ghana, Burkina Faso and Mali come to export X-Pression products to their countries, but since the border closure, it has been difficult for such business transactions to occur.
This means that X-Pression which used to enjoy patronage from Western and other African markets before now has only the Nigerian market as a revenue source. Such drastic decline in clientele list is expected to have a negative impact on a company. And that has begun to take effect, with the downsizing of its workers.
Knockoffs taking over Nigerian market
40% of X-Pression products in the Nigerian market are fake. This is another way Solpia (producer of X-Pression attachments) and Linda (producer of X-Pression weavon) are losing return on investment. The only market remaining to salvage a future for the companies has been taken over by the Chinese.
Most X-Pression products are shipped out of Nigeria to various markets offshore because the products are manufactured within Nigeria, however, some Chinese have found a way to import fake X-Pression products into Nigeria.
According to Onyekwelu, Onitsha, Aba, Port Harcourt, Benin, Kaduna and Lagos have been saturated with fake X-Pression, but unsuspecting customers buy the fake X-Pression products nevertheless because they can’t differentiate the original from the fake.
Also according to Onyekwelu, some Chinese nationals and Nigerians now leech off the brand’s revenue potential by sourcing for cheaper fibre.
“People are now leveraging on scarcity of raw materials to now source for cheaper fibre – maybe made in Nigeria fibre – then get our labels, print on the nylon and start selling as the real X-Pression in the market.”
The original X-Pression label has unique features (a Hologram and also a hole through which the texture can be felt) which the fake products don’t have.
Electricity and CBN problem
As if the aforementioned challenges are not enough, the makers of X-Pression spend about N4 million weekly on diesel generator because the factory has to be powered for 24 hours.
He also stated that the company is unfairly treated by the Central Bank of Nigeria (CBN) as regards foreign exchange. According to Onyekwelu, they often get far less than the FX they request, “Another problem we’ve been having is the Central Bank in the foreign exchange.
“Most times, if we are applying for foreign exchange, we apply for maybe, $1 million, we will be given maybe $1000. It’s not even encouraging. We have to source for the balance outside.”
Ripple effects of X-Pression’s dwindling fortune
Impact of X-Pression’s challenges on staff: With the companies’ revenue source being hit, it’s only a matter of time before Solpia and Linda are brought to their knees, and the clock is ticking already, as the company has begun to downsize in large numbers.
The companies used to boast of about 13,000 workers some years ago, but now, it only accounts for about 7,000 employees. The growth of Solpia and Linda is dependent on the growth of X-Pression despite having other brands in the market.
Aside from these companies being vital contributors to the employment numbers in the country, they are employers of women, who make up almost all the workforce in Solpia. But sadly, thousands of them will have to bid their colleagues goodbye by the end og October; two days away from now.
Due to its financial difficulty and the state of Nigeria’s economy, Solpia terminated the contract of Amalya Consults Limited. The recruiting agency had employed 1126 workers to work for Solpia and Linda, but these employees will be aced in the downsizing process.
Although Onyekwelu confirmed to Nairametrics that some of the workers sacked will be recalled after the company find its footing, he isn’t sure if the recall will happen this year or next year.
Nairametrics learnt that the company had tried to hold off the downsizing of its workforce for close to two years, sending workers of a department on technical leave every now and then – depending on which raw material is delayed at the port – rather than sack its workers. But it can no longer maintain the financial strain.
Linda Manufacturing is winding up: Although the sister company of Solpia is still in business, Linda is gradually winding down, as workers are resigning and being sacked. The company which is located in Mushin, Lagos State, now has an operating arm in Solpia’s factory which is located along Iju Road, Agege.
Amalya Consults shutdown: The termination of contracts also affected Amalya Consults as the outsourcing agency shut down its operations and relieved its workers of their duties. During a visit to the company at Fagba, Ifako-Ijaiye, Lagos, Nairametrics was informed by sellers around the company that business will not commence until later next year.
Efforts to reach the company by phone proved abortive, as its contact wasn’t reachable.
Last resort to save X-Pression
Collaboration with relevant agencies: According to Onyekwelu, there are plans to collaborate with Customs and Immigration to put an end to importation of fake X-Pression products into Nigeria. Manufacturers Association of Nigeria (MAN) and the Nigerian police have been assisting in the fight against the fakers.
Nairametrics was informed that a Federal High Court order had also been granted against fakers, and one company involved in production of fake X-Pression products has been raided in Ikotun. However, it was learnt that the Standard Organisation of Nigeria (SON) hasn’t been of help much as they require logistics to be taken care of by the complainant.
X-Pression’s future in FG’s hand: Onyekwelu said government intervention is urgently needed to keep Solpia and Linda on their feet and prevent the manufacturers of X-Pression from shutting down. He said the border closure should be reconsidered because other manufacturers who are not rice producers are being affected.
Onyekwelu isn’t far from the truth, as Nairametrics had previously reported that other businesses are being affected due to the border closure. Producer of fruit drinks, So Fresh, had told Nairametrics that its revenue had been hit by the closure.
According to Onyekwelu, the decision of the government to close the border might be for the good of producers of rice, but it simultaneously has a negative impact on X-Pression and other businesses.
He also suggested that the government should ban importation of hair products in order to protect producers in Nigeria and lure foreign importers to establish their operations in Nigeria. Onyekwelu said that this is more favourable than allowing them import into Nigeria because it will help reduce unemployment in Nigeria and boost Nigeria’s industry.
He added that government should make foreign exchange accessible for raw material and review the port charges.
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.