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Manufacturing

Big players in Paints and Coatings industry suffer 52% profit loss in the first 6 months of 2020

The COVID-19 induced lockdown took a huge toll on the activities of the producers.

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Bolarin Okunowo, Portland Paints and Products Nigeria Plc appoints Non-Executive Director, Portland Paints announces new board changes, Portland Paints and Products Plc: Decrease in paint sales, depletes revenues. 

The economic challenges triggered by the COVID-19 pandemic and accompanying issues from foreign exchange illiquidity coupled with the existing structural and regulatory imbalances in the economy constrained the operations of the big players in the paints and coatings industry in the first half of the year.

The knock-on effect of the COVID-19 induced lockdown on the global and domestic value chain like other sectors in the economy took a huge toll on the activities of the producers in the paint and coating industry, as the pandemic disrupted their operations and also their trade segments, and this in extension led to a fall in demand, sales volume, revenue and underlying profits of the players.

READ: Can Berger Paints increase market dominance by reducing prices?

The paints and coatings industry is highly fragmented, with small producers accounting for more than half of the total revenues generated in the paints and coatings industry. The big players who have elaborate dominance in the industry include CAP plc, Berger Paints Nigeria Plc, Portland Paints and Products Nigeria Plc and Meyer Plc.

According to the half-year financial results of CAP plc, Berger Paints Nigeria Plc, Portland Paints and Products Nigeria Plc and Meyer Plc, the sales of these companies were severely affected by the pandemic with the cumulative revenues of these companies declining by 12.8% from N7.4 billion to N6.5 billion owing to disruption to the trade segment and the operations of the companies.

READ: Berger Paints to partner Lagos State on infrastructure 

On the flip side, Berger paints was the only company that reported a growth in revenue in the first half of this year, with the company’s revenue growing by 16.77%. While the revenue of CAP plc, Portland paint and Meyer declined markedly by 10.71%, 43.27% and 34.82% from N3.91 billion, N1.36 billion and N604 million reported in H1 2019 to N3.5 billion, N771 million and N393 million respectively in the first 6 months of 2020.

Extensively, the raw materials such as resins, pigments and additives used in the industry have to be imported and these materials are subjected to import levies, exchange rate volatility and haulage costs.

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Given the current business reality of the paints and coatings industry which is coloured by foreign exchange illiquidity as well as logistics and regulatory rigidities in importing raw materials, the margins of these companies were affected directly, as profitability was suppressed by the hike in input prices.

Although Berger paints reported a 16.77% growth in revenue, the cost impact of the raw materials it used in its operation along with the increase in administrative expenses led to the fall in profit after tax by approx. 72%, with the company spending N812 million on raw materials from N664 million last year it expended last year.

In like manners, the bottom line of Chemical Allied Products Plc and Portland paints Nigeria Plc fell by 30% and 217% respectively. While Meyer’s loss rose by 105% to post a N60.7 million loss from N29.5 million last year.

Survival strategy deployed

With revenue constrained, it is noteworthy that in the quest to make more sales, CAP Plc and Berger paints relaxed their credit policies, this development made trade and other receivables increase by 121% and 30% respectively, this indicates that the top producers of paints relaxed their credit policies in a bid to generate more sales with their buyers cash strapped.

Omokolade Ajayi is a graduate of Economics, and a certificate holder of the CFA Institute’s Investment Foundation Program. He is a business analyst, and equity market researcher, with wealth of experience as a retail investor.

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Energy

BUA Group awards contract for polypropylene plant in its refinery project

The completion of the project is to help boost Nigeria’s capacity to meet the country’s increasing demand for petrochemical products.

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BUA Group chairman, Abdulsamad Rabiu, African Continental Free Trade Agreement, AfCFTA, CCNN

Nigeria’s leading indigenous conglomerate, BUA Group has announced that it has signed a contract agreement with Lummus Technology for the establishment of a polypropylene plant in its refinery and petrochemical project.

The completion of the project is to help boost Nigeria’s capacity to meet the country’s increasing demand for petrochemical products.

The Chairman of BUA Group, Abdul Samad Rabiu, while disclosing the contract agreement, expressed confidence in the capacity and technical expertise of Lummus Technology to deliver a best-in-class project.

READ: BUA says its export-focused sugar project will create jobs and checkmate price hike

What the Chairman of BUA Group is saying

Rabiu in his statement said, “We are pleased to sign this polypropylene contract for our BUA refinery and petrochemicals project with Lummus Technology, a world leader in delivering polypropylene solutions, which will solve the increasing demand for high-performance grade polypropylene in Nigeria, the Gulf of Guinea as well as the Sub-Saharan Africa Region.

“We are confident in the capacity and technical expertise of Lummus Technology to deliver a best-in-class, 285,000 tpy polypropylene unit for our refinery project scheduled to come on stream in 2024.’’

READ: Dangote, BUA reconcile over sugar plant dispute after meeting with Ganduje, others

What the President/Chief Executive Officer of Lummus Technology is saying

On his part, the President/Chief Executive Officer of Lummus Technology, Leon de Bruyn, said that he was looking forward to working with BUA refinery on the project.

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Leon said, “We look forward to working with BUA Refinery on this critical project and supporting the first Novolen polypropylene unit in Nigeria. Our world-class Novolen technology is well suited to meet Nigeria’s increasing demand for the growing petrochemical products market.

It offers a flexible range of industry-leading products for all PP applications, and the industry’s lowest overall capital and operational costs while providing customers with high process reliability and flexibility in responding to market needs.”

READ: BUA Group, French company announce progress in 200,000 bpd refinery project

What you should know

Lummus Novolen Technology GmbH licenses polypropylene technology and provides related engineering and technical support/advisory services. Novolen also supplies NHP® catalysts for the production of high-performance polypropylene grades in the Novolen process, and NOVOCENE® metallocene catalyst for the production of special polypropylene grades.

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Companies

Our First Bank loan is being serviced, reduced by 30% in 2 years – Honeywell Group

The credit facilities accessed from First Bank were granted after due negotiations, with the necessary documentation and in line with regulatory policies and industry standards.

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Billionaire watch: Oba Otudeko’s stakes in Firstbank and Honeywell are worth N10.3 billion

The Honeywell Group has said that its loan with First Bank is being serviced as the conglomerate had reduced the facility by 30% in the last two and half years.

This was disclosed by the Group via a statement issued on Sunday and seen by Nairametrics.

According to the statement, the company and the bank have had a professional business relationship since 1975, which preceded the group’s investment in the bank over a decade later.

According to the Honeywell Group, the credit facilities accessed from First Bank were granted after due negotiations, with the necessary documentation and in line with regulatory policies and industry standards.

The Group further explained that following agreed terms, its facilities are adequately secured with First Bank with collaterals in place at over 170% of forced sales value and 230% at open market value.

It stated, “In 2015, First Bank under the directive of the Central Bank of Nigeria, drew our attention to a 2004 circular (BSD/9/2004) which requires that insider related facilities must not exceed 10% of paid-up share capital.

Based on this directive we subsequently entered negotiations with the bank to agree on an appropriate repayment structure and the final negotiated position was duly approved by the CBN.

In addition to the above, First Bank, on the directive of CBN, requested additional security in the form of FBN Holdings Plc shares held by the Chairman of Honeywell Group, Dr Oba Otudeko citing a 2001 circular. This was duly provided through an authorisation to place a lien on the shares.”

Honeywell Group has continued to meet all its obligations on its facilities with the bank according to agreed terms and has reduced its exposure by nearly 30% in 2.5 years. The facilities were charged at market rate and the bank continues to earn significant interest therefrom.”

What you should know

  • Nairametrics had reported when the Central Bank of Nigeria directed Honeywell to fully repay its obligations to First Bank within 48 hours, warning that failure to do so would cause the CBN to take regulatory measures against the insider borrower and the bank.
  • The Chairman of Honeywell Group, Oba Otudeko, also served as Chairman of FBN Holdings Plc until he was asked by the apex bank to go along with other directors on Thursday.
  • The apex bank had noted in a letter last Wednesday that First Bank had yet to comply with regulatory directives on divesting its interest in Honeywell despite several reminders.
  • Also, the CBN asked First Bank to forward evidence involving the divestment of interest in Honeywell Flour Mills and Bharti Airtel Nigeria Ltd within 90 days.

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