Friday, 19 January 2018
Business and Economy

Business and Economy (750)

In an effort to strengthen market competitiveness, ensure growth and profitability, Champion Breweries plc has concluded required processes towards recapitalization, Shuaibu Ottan, Chairman of the company said at the company’s 2011 and 2012 combined annual general meeting in Lagos.

 

He said that refinancing of existing debt through conversion to equity and injection of fresh cash to the company through rights issue were key success factors that must be embarked upon; adding that efforts were being made to secure the cooperation and commitment of major shareholders to participate in the refinancing programmes.

 

Giving accounts of the 2011 financial year, Ottan disclosed that the company recorded a loss of N1.8 billion, stressing that the huge down-turn was principally due, in part, to the N603.5 million committed to the overhauling of the company’s production equipment to enhance improved capacity to function efficiently and achieve its set production targets.

 

Other factors that contributed to the loss, according to the chairman, were interest cost of N517 million arising from the company’s accumulated debt burden, and the N716m on depreciation occasioned, partly by the evaluation of assets during the year.

 

According to him, the trading results for 2012 continued on the negative trend as in previous years. He noted that turnover remained stable at N1.8 billion; while loss of N1.3 billion was recorded for the year. Interest cost of N707 million and depreciation charge of N782 million resulting mainly from asset revaluation, are major contributing factors to reported loss.

 

He pointed out that efforts must be geared towards resolving the issues surrounding the planned debt re-financing as well as improvement on the utilization of installed capacity of the brewery towards positive turnaround of the business performances.

 

Ottan further explained that with the support of professional advisers, the various restructuring options were fully considered before the company resolved to go for the following order of refinancing; debt-to-equity conversion, allotment of shares on deposit for shares account balances and right issue.

 

In the board meeting of 7th of June, 2012, he disclosed that the board approved a share conversion price of N1.85 per share for the debt-to-equity conversion. He said this was based on the fact that valuation methods such as discounted cash flow do not ascribe value to the company’s shares in view of its huge debt and interest burden.

 

After taking into consideration the recently concluded acquisition by Consolidated Breweries Plc of the 57 per cent shareholding in Champion and the regulatory filings for the transaction, which included a price of N1.85 per share, he said the price range for the debt-to-equity conversion of 50 kobo to N1.85 per share was considered.

He said, ‘’this means that 3.1 billion ordinary shares will be allotted to Consolidated Breweries to reduce the company’s debt with N5.735 billion’’. The board also resolved to propose an increase in the Authorized Share Capital.

Posted On Wednesday, 19 June 2013 12:51 Written by

Fund managers and investors are wondering if the biggest one day drop in Nigerian equities is the start of a bear market, or just a healthy correction after the huge run up in share prices year to date.

The equities market created a historical record last Thursday as Nigeria’s All-Share Index (NSEASI) declined by 3.88 percent on speculation that foreign investors exited the world’s fifth-best performing exchange this year, on concerns that global stimulus measures may ease.

“Ex-Dangote Cement {DANGCEM} the market return would have dipped by 5.32 percent. Neither of which has been recorded in the last  six years, even during the peak of economic recession in 2008,” said Meristem securities analysts in an equities market update.

A bear market is a general decline in stock prices of 20 percent from its most recent highs, while a stock market correction, or pullback, is when the stock market declines 10 percent or less in a relatively short period of time.

While corrections are often a great place for a value investor to find an entry point, bear markets rarely provide great entry points, as timing the bottom is very difficult to do.

“I think this is a correction, but history warns us that after one of the great crashes (1929, 1973, 2007) there is often another big challenge some eight years later (1937, 1980-82, 2015?),” Charles Robertson, Global chief economist at Renaissance Capital, said in an email response to questions.

“This may come from Fed tightening or problems in the Eurozone. But for now, we assume this is a modest correction and that investors are likely to gently return to the markets in emerging and frontier that have sold off.”

Frontier markets such as Nigeria had until last week been proving resilient to the three-week old selloff that had erased $1.9 trillion of global equity value.

The gauge has gained 37 percent this year, boosted by a 55.4 percent gain in DANGCEM. Nigeria’s economy, which expanded by 6.3 percent last year, is forecast to grow 7.2 percent in 2013, according to the IMF.

However as offshore investors exited the domestic bond market earlier this week, on fears that the Federal Reserves loose money policy is nearing an end, stock market investors seem to have taken a cue and followed suit.

The foreign portfolio inflow in the system is equivalent to 25 percent of current dollar reserves of $48.4 billion, and about 10 percent of that is in fixed income and 90 percent in equity, meaning that offshore money in equities is a sizable $10.89 billion or 14.52 percent of Nigeria’s stock market, valued at $75 billion as at last Wednesday, before the sell off.

The naira, which strengthened 3.9 percent against the dollar last year and was the continent’s best performer, has retreated 1.8 percent this year to N159 per dollar. A drop in the naira erodes the capital gains of foreign investors.

“The key question is whether the NSE can continue to trend higher,” Samir Gadio, an emerging markets strategist at Standard Bank, London said.

“Add to this rising fixed income yields in Nigeria and the upwards pressure on USD/NGN, and one may start thinking that the rally in Nigerian equities is becoming over-extended.”

Nigerian bond yields have been rising as the emerging markets fixed income carry trade unwinds.

The yield on Nigeria’s benchmark ten-year government bond due January 2022 last week rose to their highest since the October addition of  Nigerian bonds to JPMorgan’s emerging market bond index.

The yield on the 2022 securities has risen from a low of 11.68 percent in January to 13.90 percent last Thursday, according to data from the Financial Markets Dealers Association, FMDA website.

Foreign investors accounted for 43 percent of trade on the NSE in March and 61 percent in all of 2012, while net foreign inflows into Nigerian equities amounted to N29.3 billion($182 million) in March, compared with N93.8 billion in 2012,according to data from the bourse.

Posted On Monday, 17 June 2013 10:51 Written by

Nestle Nigeria Plc (NESTLE), the West African nation’s largest food company by market value, headed for its largest retreat on record as investors sold shares on speculation the stock was overvalued, FBN Capital Ltd said. 

The stock fell for a second day, sliding as much as 10 percent, the most on a closing basis since at least Jan. 25, 2002, when Bloomberg started compiling the data. It traded 7 percent lower at 930.01 naira by 1:26 p.m. in Lagos, Nigeria’s commercial capital. About 1.7 times the three-month daily average volume of shares were traded. 

Nestle Nigeria’s shares jumped in May, pushing its relative-strength index above 70, an indication to some traders that the stock may be overbought. The level dropped to 35.6 Thursday as the shares’ decline over the past five trading days extended to 16 percent, the fourth-worst performer on the Nigerian Stock Exchange’s All Share Index. 

“There is a general selloff after the price rally,” Bunmi Asaolu, an analyst at Lagos-based FBN Capital, said today by phone. “Our target price for the stock is 852 naira, based on cash flow.” 

Nestle Nigeria said on May 3 net income for the three months through March declined to 5.99 billion naira ($37 million) from 6.2 billion naira a year earlier. Revenue rose to 30.7 billion naira from 28.7 billion naira, it said. 

The company’s shares rose 29 percent this year, in line with a 29 percent gain in the all-share gauge. 

Posted On Thursday, 13 June 2013 19:33 Written by

Nigerian banks’ ratio of non-performing loans to total credit plunged to 3.8 percent in April from 35 percent in November 2010 as bad debt was shifted to a government-sponsored agency, the central bank said.

The decline followed the takeover of 4.7 trillion naira ($29.7 billion) of poor-quality loans by the Asset Management Corp. of Nigeria, or Amcon, Central Bank of Nigeria Governor Lamido Sanusi said today at a conference in Lagos, the nation’s commercial capital.

Nigeria implemented new banking regulations following a debt crisis in 2008 and 2009. The central bank fired eight chief executives of the country’s 24 banks and created Amcon to buy lenders’ bad debts and stabilize the industry. Amcon spent 5.6 trillion naira in 2011 to acquire the non-performing loans, Chief Executive Officer Mustafa Chike-Obi said in December.

Nigerian banks have seen improvements in risk management and corporate governance following the changes, Sanusi said. Risks to the banking system include “rising flow of hot money into the financial system and terrorism,” he said.

Posted On Monday, 10 June 2013 13:02 Written by

SHAREHOLDERS of FBN Holdings Company (Holdco) Plc, on Friday, endorsed the company’s N33billion dividend, culminating to N1.00 per share due to every shareholders of the company for the 2012 financial year.

The shareholders who spoke at the 1st yearly general meeting of the company in Lagos recently commended the management for the efficient running of the affairs of the group, as well as repositioning it to profitability amid harsh economic environment.

The National Coordinator, Independent Shareholders’ Association of Nigeria, Sir. Sunny Nwosu who commended the management on the inaugural meeting submitted that with capital adequacy of the group which had exceeded regulatory requirement and the current balance sheet  which stood at N3 trillion, the future of the company was secured.

Nwosu, therefore, advised the company to ‘work’ on its savings by accessing cheap fund in order to enhance its operations.

He expressed the need for the company to plan ahead on the removal of Commissions on Transactions (COT) in the next two years, while urging them to ensure that the process involved in disposal of its assets would be done in a transparent manner.

The National Chairman, Progressive Shareholders’ Association of Nigeria, Mr. Boniface Okezie urged the company to consolidate on the performance by ensuring that all the subsidiaries contributed to the overall growth of the company.

“The awards received so far have shown that the bank and the company are doing well. I commend the board for transforming the bank especially in the area of service delivery and I urge you to sustain this aggressive banking to consolidate on the efforts.”

Responding, Chief Executive officer of FBN Holdings,  Bello Maccido said: “I am pleased to present the maiden results of FBN Holdings following its restructuring as a non- operational holding company with oversight of four major business groups; namely, commercial banking, investment banking and asset management, insurance and other financial services. During 2012, the group delivered robust results with a year-on-year increase in gross earnings of 31per cent, while profit after tax rose 306 per cent and the group delivered broad based improvement across all key ratios.

“Having now restructured the business, the focus is on consolidating the group’s leadership position in Nigeria, providing financial solutions to our customers across the entire value chain and growing our different business lines. Strong natural synergies and cross-selling opportunities exist across the group, and we are intensifying our efforts to facilitate the realisation of these synergies, crytallise cross selling opportunities and deepen the relationship with our customers.

“The solid retail platform in the commercial banking business gives us the ability to harness latent growth in our insurance and asset management businesses. We believe the approach of revenue maximisation, underscored by implementation of robust risk management practices, will enhance shareholder value in the medium to long term.”????

He explained that with FirstBank taking a leadership position in sub-saharan Africa, the group had put structures in place that would put other subsidiaries at the fore to contribute to the overall growth of the company.

In readiness for the COT, which would take effect in the next two years, Maccido said that the group had last year reinforced its position as a retail franchise by adding 70 branches to the existing ones, thereby bringing the number of branches to 807.

“This would drive the mobilisation of low cost deposit so that we locate ourselves to other areas and where we loose on COT, we compensate ourselves with volume.”

He said that the group had obtained license to operate on mobile money transfer (First money) without any equity partnership with any telecomm firm in order to derive the benefits inherent in the business.”

Posted On Monday, 03 June 2013 03:40 Written by

THE Governor of the Central Bank of Nigeria (CBN), Mallam Sanusi Lamido Sanusi, said that out of the N5.7 trillion bonds, the apex bank is holding N3.6 trillion, under the Special Class bond, which it used as a risk mitigation strategy.

Sanusi made the disclosure in Lagos, at the first National Risk Management conference, with the theme: “Our Ever-Changing Risk Context: New Channels, New Risks.”

Sanusi explained that AMCON, as an agency under the regulation of CBN, did not just purchase non-performing loans, but that it was a measure to fill in the hole that existed because of theft and recklessness in the financial system, leaving a negative networth in many financial institutions.

“The unique thing we did, in recognition of the hole that was created was to have a structure that prevented the loan taken by AMCON from being borne by government and taxpayers and agreed with the banking industry that they will put in the money over 10 years.

“Today, AMCON has bonds with a face value of N5.7 trillion, with CBN holding N3.6 trillion value. This was not the original intent, but also part of the risk management.

“Many banks that got early bonds, did so when interest rate was seven per cent and by the time we completed the capitalization of the other banks, interest rate has moved up with about 500 to 600 basis points. This would have been huge erosion of the capital of those banks and that would have just thrown these banks back to where they were.

“So, CBN swapped the AMCOM bonds for Open Market Operations bills and other instruments that will not carry those market risks and we had N3.6 trillion out of N5.7 trillion. AMCON is expected to pay back N1.7 trillion by December this year or at least refinance it and N4 trillion next year,” he said.

CBN governor said the option of the apex bank’s bond holding was weighed against raising fund through European bonds and domestic capital market, noting that it would have compounded the risks with the economic issues in Europe and the prevailing interest rate of 13 or 14 per cent in the country.

“There was no way AMCON would have paid back in 10 years, unless we doubled or tripled the levy on the banks, which would have been reactionary too. It would have been a situation where banks had to pay one or 1.5 per cent of their balance sheet every year to service an extensive debt.

“We also worked out how much AMCON can pay by December this year. The idea was that if it can stretch itself, it can build up its current N800 billion to about N1.1 trillion, which is enough to pay every holder of AMCON bond maturing in December 2013, except CBN.

“Now, CBN will refinance and restructure the N3.6 trillion bond it invested with a coupon of six per cent. By October 2014, AMCON’s N980 billion bond under series five will mature, which AMCON will pay with sinking fund and recoveries. Actually, after December this year, AMCON will be left with the Special Class bond with CBN only,” he said.

Posted On Monday, 27 May 2013 18:13 Written by

Guinness Nigeria Plc (GUINNESS), the West African nation’s second-largest brewer, said nine-month profit declined 18 percent as weak consumer spending stifled growth.

Net income fell to 7.6 billion naira ($48.3 million) in the nine months through March, compared with 9.3 billion a year earlier, the local unit of London-based Diageo Plc (DGE) said today in a statement on the Nigerian Stock Exchange website. Revenue climbed 3 percent to 94.9 billion naira, while cost of sales increased 7 percent to 48.2 billion naira.

 

Inflation in Africa’s most populous nation raised raw material costs and crimped consumer spending on beer and non-alcoholic beverages, Guiness Nigeria Chief Executive Officer Seni Adetu said on a conference call in February. The company’s management is scheduled to host a call with analysts at 2 p.m. local time in Lagos, Nigeria's commercial capital.

 

“It would appear that the company has not yet recovered from the squeeze on household wallets that affected most consumer names last year and brought about a slowdown in beer consumption,” Tunde Abidoye, a Lagos-based analyst at FBN Capital Ltd., wrote in an e-mailed note today. “In addition, we feel Guinness Nigeria’s beer volumes are seeing increasing competition from both traditional rivals such as Nigerian Breweries Plc (NBL) as well as SABMiller Plc (SAB), which is making in-roads into the low-end segment of the Nigerian beer market.”

 

Guinness Nigeria’s share price was unchanged at 280 naira at 12:03 p.m. in Lagos trading. The stock has increased 1.8 percent this year, compared with a 28 percent gain on the Nigerian Stock Exchange All-Share Index (NGSEINDX).

 

Posted On Thursday, 16 May 2013 13:46 Written by

United Bank for Africa (UBA) Plc has announced its audited financial results for the full year 2012-revealing that total comprehensive income attributable to equity holders stood at N55.53billion, compared with a loss of N1.12billion of the previous year. This is an increase of 5,058.04%.

Profit figures grew by over 905% to close at N54.8billion from the N6.8billion loss it recorded in the previous year, on account of loan provisioning that it did to clean up its balance sheet.

Details of the impressive result released at the Nigerian Stock Exchange to stockbrokers and the financial community, show improvement in all indicies in a performance that has seen the complete turnaround of the pan–African financial services institution.

Profit before tax rose over 295% to N52.00billion in 2012, compared with a loss of N26.60billion in the previous year, whilst Total Comprehensive Income attributable to equity holders grew outstandingly by 5,058% to N55.53billion, compared with a loss of N1.12billion in 2011.

Gross Earnings in 2012 for UBA grew significantly by 34.45% increase in gross earnings to peak at N220.1bn; representing approximately N56.40billion additional revenue from the N163.7bn achieved in the preceding year whilst the bank was able to keep total operating expense lower by 3.30% in the same period under review.

“We achieved those results despite a tough operating environment, demonstrating the strength and resilience of our business model. UBA had a strong year in 2012. Our success was again driven by the strength of our customer-focused, Corporate and Treasury driven business model. We are confident about our ability to deliver sustainable earnings growth in the future. We will continue to strategically invest in our businesses, manage our expenses and contain cost, whilst continually seeking ways to exceed expectations  of our stakeholders” said Oduoza.

Commenting further on the performance of the bank, the UBA GMD commended staff for the turnaround performance. “As always, our employees and their dedication to our customers and clients remain the driving force behind our success and I thank them for their tremendous contributions. The bank had a good performance for full year 2012, putting us in a position to commence the journey back to industry leadership and setting the stage for the attainment of our long term strategic intent of being a leading bank on the African continent,” he stated

Also commenting on the results, the Group Chief Finance Officer  Ugochukwu Nwaghodoh, said the bank has continued to focus on customer service delivery, efficient capital management and returns maximisation, with return on equity exceeding 30 per cent in 2012, one of the highest in the industry.

“Our ability to serve clients globally with solutions tailored to their needs gives us a strong advantage in today’s rapidly changing and highly competitive market place. Adopting a unique business platform across Africa, as a group, has also ensured that we present a single face to our customers and clients around Africa. This does not only help foster collaboration throughout the Group, it also strengthens our ability to deliver value adding and innovative solutions to our customers and clients through our integrated model” Nwaghodoh further stated.

With operations in 19 African countries and presence in New York, London and Paris, UBA provides banking services to over 7 million customers through expansive retail distribution outlets. Its ability to deliver tailored financial solutions based on high-value customised products and services sets it apart from peers.

Posted On Monday, 13 May 2013 02:04 Written by

Ashaka Cement Plc (Ashakacem) has announced profit after tax of N3.124 billion for the year ended 31st, December, 2012, 8.3 percent improvement over N2.885 billion recorded in the previous year

The slight increase seen in the profitability within the year could not be unconnected with the cost of sales, which remained high in line with 2011 trend, as well huge rise in taxation.

Analysis showed that the company’s cost of sales for the period rose to N13.500 billion compared to N13.276 billion in 2012, while tax payable for the year went up by 86.6 percent to N2.348 billion from N1.258 billion.

Selling and distribution expenses jumped to N617.245 million from N473.905 million, a 30.2percent increase over the period

The administrative expense at N3.775 billion was 13.7 percent increase over N3.321 billion recorded in the same period of 2011.

However, profit before tax rose by 32.1 percent to N5.473 billion from N4.4144 billion in 2011, while gross earning rose to N21.825 billion, a five percent improvement over N20.780 billion generated in 2011.

Basic earnings per share also went up marginally by 8.5 percent to 140kobo from 129kobo in the preceding year

Addressing shareholders at the last annual general meeting, the chairman, Alhaji Umaru Kwairanga, had raised hope about better return, as a result of cost cutting measures he said the company would institute in 2012.

According to him, the objective going forward was to intensify efforts in the acceleration of projects that would improve costs and production volumes so that “We are set to fully participate and enjoy the benefits the deficit in the nation’s housing stock and a large percentage of unpaved road network present in the cement industry.”

He had stated that a key element of the company’s cost reduction effort was focused on increasing the substitution rate of local coal for expensive low pour fuel oil (LFPO) as fuel for firing of its kilns.

Speaking at the event, the Managing Director/CEO, Mr. Neeraj Akhoury, said the prime objective of the company is to maximise the rate of utilisation of production capacity.

“The third and most important objective is to start the first phase expansion through which we should target a production capacity of 1.3 million tonnes.

 

Posted On Sunday, 12 May 2013 23:35 Written by

FBN Holdings Plc is looking for opportunities to enter 11 other countries in Africa, the financial giant's Chief Executive Officer (CEO) Bisi Onasanya has said.

“Essentially we’re looking at West Africa, Francophone and Anglophone countries,” Onasanya said in an interview today at the World Economic Forum in Cape Town. “We will never do greenfields and it has to be in line with our retail banking strategy.” 
 
The executive, however, declined to name the countries.
 
FBN Holdings, owner of First Bank Nigeria, won’t undertake any expansion that hurts its plan to “dominate” in its home market, Onasanya said. The 119-year-old lender, which has more than 700 branches in Africa and 7 million customers, said yesterday that it plans to sell a $500 million euro bond this year to fund loans and help the bank expand.
 
“A listing elsewhere is part of the medium-term to long-term strategy,” Onasanya said, adding that he met with representatives of Johannesburg’s stock exchange yesterday.
 
FBN Holdings has gained 27 percent this year in Lagos trading, beating the 22 percent increase in the Nigerian SE Banking Index, which tracks the country’s 10 biggest banks. 
Posted On Thursday, 09 May 2013 12:39 Written by
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