DANGOTE Sugar Refinery, DSR, Plc on Monday, August 4, reported a profit before tax of N10.3 billion for the half year which ended June 30, 2014. However, the figure shows a decline of 5.5 percent compared to N10.9 billion recorded in the corresponding period of 2013. Details of the results made available by the Nigerian Stock Exchange, NSE, showed that DSR ended the period with a revenue of N49.6 billion, indicating a decline of 9.8 percent from the N55 billion recorded in 2013.
The decline in revenue was attributed to a two-week plant upgrade which took place in May and gas supply disruptions for a couple of weeks in June. Low pour fuel oil, LPFO, provided an alternative energy source during that period. The company improved on its operational efficiency as cost of sales, distribution and other expenses declined as well. For instance, cost of sale fell by 7.6 percent from N39.6 billion to N36.6 billion. Similarly, distribution expenses dipped by 55 percent from N6.57 billion to N2.925 billion.
But, other income, which stood at N2 billion in 2013, went down to N304 million in 2014, showing a dip of 84 percent. Financial charges also stood at N75 million as against nothing in 2013. Consequently, profit before tax fell to N10.263 billion in 2014, as against N10.859 billion in 2013. Profit after tax witnessed a lower decline of 2.6 percent, falling from N7 billion to N6.83 billion.
Despite the decline in results, the shares of DSR closed positively at the stock market during the week, appreciating by 10 kobo to close at N9.10 per share. However, trading at the stock market resumed on a negative note as the NSE All-Share Index fell by 0.31 percent to close at 41,801.51. Similarly, market capitalisation shed N44 billion to close at N13.803 trillion.
Dangote Cement Plc led the price losers’ chart with N3.65 to close at N226.35 per share. Guinness Nigeria Plc trailed with a decline of N2.70 to close at N191.30 per share. PZ Cussons Nigeria Plc depreciated by N1.65 just as Stanbic IBTC Bank Plc and Nestle Nigeria Plc went down by N1 apiece.
There Comes Lafarge Africa
FOLLOWING shareholders’ approval and other regulatory processes, Lafarge WAPCO has formally notified the Nigerian Stock Exchange, NSE of the change in its name to Lafarge Africa Plc, paving the way for the impending listing of the consolidated shares, which are expected to boost market value by over N468 billion. A cross-survey of leading investment experts and advisors showed a strong support for the decision of Lafarge to consolidate its Nigerian and South African businesses under a single entity.
They described it as a strategic move that could change the game plan in the Nigerian investment market, the cement industry and African mergers and acquisitions. It will be recalled that Lafarge, on July 9, 2014, received overwhelming shareholders’ approval to consolidate its cement businesses in Nigeria and combine these with Lafarge South African operations to create a leading sub-Saharan building materials giant to be known as Lafarge Africa Plc. The consolidation is being done by transferring Lafarge’s assets in South Africa and Nigeria to Lafarge Cement Wapco Nigeria Plc.
Under the transaction, Lafarge Group will transfer its direct and indirect shareholdings in Lafarge South Africa Holding Limited of 72.4 per cent and its equity stakes in three other cement companies in Nigeria-United Cement Company of Nigeria Limited (35 per cent), Ashaka Cement Plc, (58.61 per cent) and Atlas Cement Company Limited (100 per cent) to Lafarge Wapco for a cash consideration of $200 million and the issuance of some 1.4 billion Lafarge Africa shares to the Lafarge Group. Lafarge Africa, which would retain Lafarge Wapco’s subsisting listing on the NSE, is estimated to have an initial market capitalisation of over $3 billion (about N468 billion), making it the 6th largest company on the NSE by market capitalisation.
Equity advisors and market experts in several leading investment firms, which are not involved in the Lafarge transaction, said they believed the emergence of Lafarge Africa would create better values for shareholders through increased dividends and capital appreciation as well as the cement industry through a much more competitive pricing and quality scenarios.
According to them, the Lafarge Africa transaction could encourage other multinationals and Nigerian companies to further explore the potential for mergers and acquisitions, thus stimulating the investment markets and strengthening the Nigerian capital markets. Investment advisors and analysts at Lead Capital Plc, Cardinal Stone Partners and Sterling Capital Markets among others have agreed that the emergence of Lafarge Africa could directly and indirectly boost the Nigerian stock market through increased liquidity and returns on the Lafarge Africa stock and general inducement of mergers and acquisitions.
Drop in Nigeria’s Aggregate Business Confidence Index
THE Lagos Chamber of Commerce and Industry, LCCI, has painted a gloomy picture of Nigeria’s investment drive, saying business leaders are reluctant about expanding their investment over the next few months. The LCCI said business leaders are largely pessimistic about the state of the economy following the drop of the aggregate Business Confidence Index, BCI, from 19.4 percent it posted in the second quarter 2014 to 14.3 percent.
According to the chamber’s report: “The key factors that mostly depressed the confidence level of business leaders at this time are: security challenges across the country, political transition/electioneering activities and associated risks; cargo clearing issues and access to and from the nation’s foremost ports – Apapa and Tin Can; policy uncertainties and regulatory concerns; and worsening public power supply.”
On the sectoral BCI, all the sectors reported positive business confidence levels in the third quarter of 2014. ”Interestingly, the manufacturing sector posted a positive confidence level of four percent for the second time over the last seven quarters. This sector has consistently remained at the bottom of BCI league table by steadily recording negative confidence levels. Medium and small manufacturing enterprises were the most hit by the lingering challenges constraining productive activities in the country. The most disturbing factors for manufacturers include: power supply challenges, logistics challenges, the influx of imported and substandard products, preference for imported goods by Nigerians, poor access to credit, high cost of doing business, infrastructure deficiency and inhibitive activities of government regulatory/monitoring agencies.”
According to the LCCI report, the optimism among players in the agricultural sector which was relatively strong in the first and second quarters is beginning to moderate. This is a pointer that operators’ expectation in the agricultural sector is beginning to wane. The BCI third quarter of 2014 survey confirmed an increasing level of uncertainty among the private sector players due to rising electioneering activities and the build-up to the 2015 general elections.
On uncertainties in the business environment sectors, the report disclosed that the oil and gas industry were mostly disturbed by the uncertainty surrounding delayed passage of the PIB coupled with the emerging developments in the global oil and gas market. It also said the long delay of federal government’s 2014 budget, influx and rising patronage of offshore advisers and business consultants in the country were mostly the concern of players in the professional business services sector.
Compiled by Anayo Ezugwu
— Aug. 18, 2014 @ 01:00 GMT