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Business and Economy (208)

Saturday, 30 August 2014 11:40

First Aluminium HY profit surges 57%

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First Aluminium plc’s, a Nigerian manufacturer of roofing sheets, half-year (HY) profit surges 57 percent amid operating challenges inhibiting the growth potentials of players in the industry.

For the first six months through June 2014, the company’s net income spiked by 57 percent to N21.32 million from N13.54 billion recorded in the corresponding period of HY 2013.

Net margin, a measure of profitability and efficiency, rose to 4.80 percent in HY 2014, compared with 3.3 percent as of HY 2013, which analysts say is low compared with other sectors.

The low margins could be attributable to high import duties on raw materials brought into the country, thus burgeoning material costs.

Additionally, the spiralling energy costs was fuelled by the use of diesel oil, which is used to power plants for the purposes of productions as electricity from the grid is unstable.

However, some analysts say the local manufacturer should use gas, which is a cheap alternative source of energy compared with fuel oil.

First Aluminium’s cost-of-sales margin remained flat at 90.90 percent, as cost of sales increased by 6 percent to N4.017 in HY 2014 from N3.77 billion as of HY 2013.

The company was able to manage direct cost attributable to projects as gross profit rose by 26.47 percent, to N430 million as against N340 million the preceding year.

The worrisome challenges in the aluminium industry, which industry operators say may lead to same situation in the textile industry that is presently in a state of moribund.

The unfair competition from China is also undermining the Nigeria aluminium industry growth as it encourages mass importation (some say dumping) of the products into the country.

Despite the aforementioned factors inhibiting top-line growth, First Aluminium’s turnover moved by 6 percent to N4.44 billion in 2014, compared with N4.11 billion the preceding year.

Businesses need tax breaks, according to Robin Nevielle, managing director of First Aluminium plc, during an interview with BusinessDay reporters.

“We are burdened with the problems of taxation and custom officials who demand extra duties from us,” said Nevielle, saying “the labour cost is going up year in year out and the delays at the ports also worsen the situation.”

He went further to say that the harsh operating environment had left the company with no choice than to lay off workers. Total assets reduced by 10.40 percent to N8.35 billion in HY 2014, from N9.32 billion the preceding year.

Return on average equity (ROAE) was 2.26 percent, while the return on average assets (ROAA) stood at 1.10 percent.

The company’s share price closed at N0.50 on the floor of the Nigeria Stock Exchange, while market capitalisation was N1.05 billion.

Share price increase recorded by Forte Oil plc, Conoil plc, Total Nigeria plc, Dangote Cement plc, and Northern Nigeria Flour Mills plc respectively, surpassed that of other equities after trading on the Nigerian Stock Exchange (NSE) yesterday.

As investors began to favour equities in their portfolio pick, the value of Nigerian stock market increased by 0.64 percent yesterday, pushing the market’s year-to-date (YtD) return high at 3.10 percent. The stock market twin performance indicators –the NSE All Share Index (ASI) and market capitalisation closed higher yesterday.

For instance, the All Share Index rose to 42,612.33 points against the preceding trading day’s 42,339.84 points, while market capitalisation rose by N89bn to N14.070trn against N13.981trn the preceding trading day.

Leading the gainers table, Forte Oil plc rose by N7.5, from N231 to N238.5; followed by Conoil plc which rose from N62.32 to N68.7, after adding N6.38.

Total Nigeria plc gained N4.01, from N172.01 to N176.02; Dangote Cement plc gained N2, from N228 to N230; while the share price of Northern Nigeria Flour Mills plc appreciated by N0.95, from N19.7 to N20.65.

The market recorded 34 gainers against 18 losers, indicating increasing buying tendencies on the side of equity investors.

On the losers table, Seplat Petroleum Development Company plc led after shedding N8.76, from a low of N708.75 to N699.99 at the close of deals.

Eterna Oil plc also declined from N4.17 to N3.99, losing N0.18; Cement Company of Northern Nigeria recorded price decline from a high of N15.33 to N15.19 at the close of transactions, losing N0.14.

Also, NAHCO made the big losers table after shedding N0.12, from N5.15 to N5.03; while Zenith Bank plc recorded share price lose of N0.11, from N25.1 to N24.99.

Volume of equities traded yesterday decreased by 37.83 percent from 323.913m to 201.385m, while the total value of stock exchanged at the Nigerian bourse declined by 38.18 percent from N4.874bn recorded the preceding trading day to N3.013bn at the close of transactions in 4,637 deals.

PZ Cussons has acquired Australian food brand Five:AM, a statement said on Friday.

The entire issued share capital of Five AM Life Pty Ltd is being acquired for  £44.1 million.

It said that an additional consideration of a maximum of £7.7 million pounds is payable subject to the performance of the business in the year ending 30 June 2015.

Five:am is an Australian organic yoghurt brand based in Melbourne. The firm reported revenue of  £19.6 million and earnings before interest, tax, depreciation and amortisation of  £3.4 million in the year to June 30, 2014.

PZ Cussons said the acquisition is being made using existing facilities and is expected to be earnings-enhancing in the current financial year.

“A combination of industry leading innovation, a compelling brand proposition and a high quality product range has driven Five:am’s growth to date and leaves it uniquely placed to take advantage of the market trends of increasing yoghurt consumption and demand for organic and nutritious products,” said PZ Cussons Chief Executive Alex Kanellis.

The business is being acquired on a cash and debt free basis using existing facilities and is expected to be earnings enhancing in the current financial year.

PZ Cussons has acquired Australian food brand Five:AM, a statement said on Friday.

The entire issued share capital of Five AM Life Pty Ltd is being acquired for  £44.1 million.

It said that an additional consideration of a maximum of £7.7 million pounds is payable subject to the performance of the business in the year ending 30 June 2015.

Five:am is an Australian organic yoghurt brand based in Melbourne. The firm reported revenue of  £19.6 million and earnings before interest, tax, depreciation and amortisation of  £3.4 million in the year to June 30, 2014.

PZ Cussons said the acquisition is being made using existing facilities and is expected to be earnings-enhancing in the current financial year.

“A combination of industry leading innovation, a compelling brand proposition and a high quality product range has driven Five:am’s growth to date and leaves it uniquely placed to take advantage of the market trends of increasing yoghurt consumption and demand for organic and nutritious products,” said PZ Cussons Chief Executive Alex Kanellis.

The business is being acquired on a cash and debt free basis using existing facilities and is expected to be earnings enhancing in the current financial year.

• FCMB Capital Markets emerges lead arranger

OANDO Energy Resources (OER), the upstream business of Oando Plc, yesterday, signed the ConocoPhilips acquisition agreement that will make Oando one of the largest indigenous oil and gas companies in the country. 

The agreement signing and completion ceremony took place yesterday, in Paris.

  OER, through the acquisition, picks up Philip Oil Co. Nigeria Limited’s 20 per cent non-operating interest in Oil Mining Leases (OMLs) 60, 61, 62, and 63, as well as the related infrastructure and facilities, in the Nigerian Agip Oil Company Ltd joint venture (NAOC JV). 

  The 20 per cent interest in the NAOC JV included 40 discovered oil and gas fields with remaining oil and gas recovery; approximately 40 identified prospects and leads; twelve production stations; approximately 950 km of crude oil, natural gas liquids and natural gas pipelines; two gas processing plants; the Brass River Oil Terminal; the Kwale-Okpai 480 MW combined cycle gas-fired power plant (“Kwale-Okpai IPP”), and associated infrastructure. 

Other assets covered by the acquisition includes; Phillips Deepwater Exploration Nigeria Limited (PDENL), which holds a 20 per cent non-operating interest in Oil Prospecting Licence (OPL) 214 located 110 km offshore in water depths of 800m to 1,800m. The other coventurers are ExxonMobil (20 per cent and operator), Chevron (20 per cent), Svenska (20 per cent), Nigerian Petroleum Development Company (15 per cent) and Sasol (5 per cent). 

    After several months of delay, the minister of petroleum resources last month, approved the conversion of OPL 214 to OML 145 for an initial period of 20 years.

  “Through this Transaction, OER will indirectly own all of the issued share capital of POCNL, CEPNL and PDENL. The effective date of the transaction is January 1, 2012.

  “In connection with this transaction, OER retained The Petroleum and Renewable Energy Company Limited as Independent Reserves Evaluator to report on the reserves and resources of the newly acquired assets, OMLs 60, 61, 62 and 63 and OMLs 131 and OPL 214 (OML 145, after conversion).

  “The independent reserves report has an effective date of December 31, 2013 and has been prepared in accordance with National Instrument 51-101 standards and the guidelines set out in the Canadian oil and gas evaluation handbook,” it stated.

   Oando stated further that, “sales production from the onshore assets averaged 36,49 bpd in 2013 and 39,266 bpd in first half of 2014. The Onshore Assets contain 211.6 mmboe of proved plus probable reserves, 217.0 mmboe of best estimate contingent resources and 333.6 mmboe of unrisked best prospective resources.

  “The offshore assets include a significant share of six separate discovered fields and eight separate prospects and contain a total of 281.6 mmboe of best estimate contingent resources and 323.3 mmboe of unrisked best prospective resources.

  “Upon completion of the transaction, OER will be positioned as one of the leading E&P players in the Nigerian oil and gas sector, as measured by end-2013 proved plus probable reserves of 230.6 mmboe, best estimate contingent resources of 536.8 mmboe, unrisked best prospective resources of 2,051.8 mmboe and first half of 2014 production of 44,512 bpd.

  “The transaction was financed with an approximate 50/50 debt-equity ratio. Half of the deferred consideration of $33 million is due six months after closing with the balance due 12 months after closing, “ it stated.

  The Transaction is immediately cash generative and will contribute significantly to the cash flows of the ompany.

  The $1.65 billion (N256.13 billion) deal, which is expected to increase Oando’s crude oil production from about 5,000 barrels per day to 50,000 bpd, was concluded following the satisfaction of all statutory requirements and approval of the Federal Government of Nigeria.

  FCMB Capital Markets Limited, a subsidiary of FCMB Group Plc, played the dual role of the mandated lead arranger and technical bank, while First City Monument Bank Limited, it’s sister company, was one of the major lenders in the transaction.

Zenith Bank Plc has released its half-year 2014 results, declaring a profit after tax of N46.669bn for the bank.

The bank’s PAT for the six-month period ended June 30, 2014 is 18.13 per cent higher than the N39.508bn it declared for the same period of 2013.

The result, which the bank filed with the Nigerian Stock Exchange, showed that it grew its profit before tax by 19.67 per cent to N55.575bn from the N46.422bn it recorded in the first half of 2013.

According to the result, the bank’s gross earnings at N174.569bn for the half-year period under review is 14.21 per cent higher than the N152.843bn it realised in the same period of last year.

The bank’s total assets for the period stood at N2.879tn, 11.03 per cent higher than the figure for the corresponding period of 2013, which was N2.593tn.

Zenith Bank Plc’s consolidated financial statements for the six-month period ended June 30, 2014 showed that the group grew its gross earnings by 7.84 per cent to N184.434bn when compared to the N171.024bn it posted for the same period of 2013.

Like the bank, the group’s profit before tax and profit after tax also appreciated.

While profit before tax was up by 11.08 per cent from N52.090bn to N57.859bn, the group’s profit after tax rose by 8.25 per cent to N47.445bn from N43.826bn.

Also, the group’s total assets rose by 15.21 per cent from N2.781tn to N3.204tn, the result showed.

The consolidated and separate interim financial statements for the bank and subsidiary companies of Zenith Bank Plc were signed by the Group Managing Director and Chief Executive Officer, Mr. Peter Amangbo, and Executive Director, Mr. Ebenezer Onyeagwu.

The bank had in the 2013 financial year grown its profit before tax by 8.3 per cent from N102bn at the end of the 2012 financial year, to N110bn; while its gross earnings also rose by 14.5 per cent to N351bn, up from N307bn recorded the previous year.

The result also showed that net assets rose by 10 per cent from N462bn at the end of 2012, to N509bn in the year under review.

In March, the bank announced it would pay a dividend of N1.75 per share to its shareholders for the 2013 financial year.

A month later, in April, it announced that it recorded 200 per cent over-subscription of its $500m Eurobond issue.

The $500m Eurobond is under a $1bn Global Medium Term Note programme announced by the bank on April 1, 2014.

The bank had said in a statement that its weeklong investors’ roadshow, co-ordinated by Goldman Sachs and Citibank, had received an overwhelming endorsement by a diversified group of global investors from Europe, the United States, Africa, Asia and the Middle East, Zenith said in a statement.

According to the statement, investor’s perception of Zenith’s domestic market leadership and its strong balance sheet defined by its liquidity, asset quality and capital adequacy are among the major factors driving the overwhelming acceptance of the bank’s first ever debt issue.

Nigerian Breweries (NB), in a filing on the Nigerian Stock Exchange (NSE) on Monday, said  its half-year pretax profit grew to N33.88 billion, up 14.4 percent from N29.60 billion a year ago.

Turnover also rose to N141.49 billion in the six months to June 30, compared with N133.81 billion in the same period of last year.

Profit after tax at the local unit of Dutch brewer Heineken grew 15.5 percent to N23.87 billion from N20.66 billion recorded a year earlier.

Activities at the Nigerian Stock Exchange (NSE) on Thursday closed on a downward trend after three consecutive days of equity rallies across the floors of the Nigerian Stock Exchange (NSE).

NAN reports that the market capitalisation which opened at N14.208 trillion lost N37 billion to close at N14.171 trillion due to profit taking.

The All-Share Index depreciated by 111.75 points or 0.26 per cent to close at 42,918.52, compared with 43,030.27 declared on Wednesday following price depreciation.

Forte Oil recorded the highest price loss, shedding N2 to close at N238 per share.

Dealers at the Nigeria stock Exchange

Dealers at the Nigeria stock Exchange

Guinness trailed with a loss of N1.8 to close at N197.1, while GTBank dipped N1 to close at N30 per share.

Oando Oil lost 92k to close at N25.65, while Lafarge Wapco depreciated by 85k to close at N119 per share.

On the other hand, Mobil led the gainers’ chart by N7.35 to close at N154.5 per share.

PZ Cussons gained N1.99 to close at N37.99, while NNFM grew by N1.02 to close at N19.79 per share.

Julius Berger appreciated by 72k to close at N65, while Total chalked up 6k to close at N180.2 per share.

Fidelity Bank emerged as the most traded stock, accounting for 44.83 million shares worth N87.49 million.

FBN Holdings exchanged 40.58 million shares valued at N652.39 million, while Nascon sold 38.59 million shares worth 399.91 million.

In all, investors traded 365.252 million shares worth N4.43 billion in 4,904 deals compared with 317.158 million shares valued at N3.06 billion traded in 5,098 deals on Wednesday.

The Economic Community of West African States (Ecowas) is to introduce a Community Regional Citizens Biometric Identity cards, officials said.

Ghana’s President John Mahama has described the move as welcome because “our people must be able to move freely in West Africa and enjoy all the opportunities opening up in our members states”.

“Its biometric features should make it easy to carry out any quick verification of identity at anytime and anywhere in the sub-region,” President Mahama said, when he opened the 45th ordinary session of the Ecowas heads of state Thursday.

The identity card, together with the implementation of a Common External Tariff (CET) regime on January 1, 2015 are likely to speed up the integration of the region.

The irony is that, President Mahama, as the current chairman of Ecowas, was facing a stiff opposition from members of the Ghana Union Traders Association (GUTA) who are opposed to foreign traders, mostly Nigerians in the country’s markets.

They have already given President Mahama an ultimatum to send out the foreign traders.

President Mahama said, the implementation of the CET, which was intended to integrate customs and duties, would help reduce delays at the borders.

Illegal checkpoints

He was hopeful that, members states and officials of the Ecowas commission would push the CET agenda in order to ensure importers in the region were “well informed to become strong advocates and stakeholders in the implementation of the common external tariff”.

CET has four tariff bands or rates of custom duty; nil per cent for essential goods, goods of primary nature including raw materials, five per cent, intermediate products, 20 per cent and final consumption products, 20 per cent.

He urged members states, particularly, border officials “to take all the legal and necessary steps to remove all challenges or bottlenecks to trade and commercial activities within our region”, adding that, “the lingering difficulties that many enterprising West Africans citizens face in doing business across our borders must be addressed”.

“Some of our business men and women complain that in addition to paying all the relevant duties and levies, they are still confronted with situations and hindrances that often make it prohibitive for them to do business within our region,” President Mahama said.

He mentioned some of the obstacles as, “the multiplicity of legal and illegal checkpoints and barriers, lengthy inspection times and documentation requirements, plus costly delays-regardless of whether documentation is complete or not”.

Two former top officials of Sierra Leone's Health ministry have been convicted for embezzling the Global Alliance for Vaccine and Immunisation (GAVI) funds.

Dr Magnus Ken Gborie and Dr Edward Magbity were convicted following the trial that began in March 2013.

And Sierra Leone's Anti-Corruption Commission is rejoicing over the first custodial sentences imposed in the captivating trial involving the Health ministry.

The money they embezzled is partly donated by multi-billionaire Bill Gates, and whose support to the country was rudely interrupted in 2012.

Following a Financial management assessment, the organisation had found that about half $500,000 of aid money was unaccounted for and subsequent investigations revealed that senior officials at the ministry of Health and Sanitation had diverted the cash into personal accounts.

The funds were for the disbursements in 2008 and 2009.

The situation prompted GAVI to pull the plug on $6 million which it was set to spend on the Sierra Leone programme.

The case received wider attention because of the initial implication of a former Health minister Zainab Bangura (she is now the UN envoy on Sexual Violence in Conflict).

She was later cleared of any wrong doing.

Mandatory jail term

The Sierra Leone Government had issued swift indictments on 17 officials, including a Permanent Secretary and the chief medical director.

GAVI, which is partly funded by the Bill & Melinda Gates Foundation, demanded as condition for its continued support, that the culprits be tried and punished.

It only resumed funding on receiving assurances from the anti-graft body that its funds would be protected and the case against the suspects pursued.

However, the Anti-Corruption Commission went on to lose a string of the cases, casting doubt about the chances of the real culprits being convicted.

Dr Gborie was the director of Planning and Information and was responsible for the implementation of the GAVI Health Sector Support while Dr Magbity was the Principal Monitoring and Evaluation Officer at the Directorate of Planning and Information.

In addition to the mandatory jail term, they paid a combined fine of over $200,000.

GAVI's support to Sierra Leone, which last year totalled over $24 million since 2000, covers access to services and strengthening of civil society engagement in the health sector.

But it is mostly focused on vaccines for child diseases like tetanus, whooping cough and hepatitis B.

"It goes without saying that the activities of these convicts provide no incentive to the donor community for further and continued intervention in the health sector," said presiding High Court judge M.A. Paul on passing judgment.

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