Category: Investors

Taofik Salako, Deputy Business Editor

Nigeria’s largest quoted company and Sub-Saharan Africa’s largest cement company, Dangote Cement Plc, on Tuesday completed the book building and allotment of its N100 billion debut bond issuance, making history as the largest single corporate bond issue in the capital market.

The first series under the company’s N300 billion shelf bond issuance programme came on the heels of success of Dangote Cement’s N150 billion Commercial Paper (CP) issuance programme.

Application for the Dangote Cement’s N100 billion Series 1 five-year Fixed Rate Senior Unsecured Bonds, which started on April 3, 2020, closed yesterday and the allotment was subsequently done. The settlement date is on Friday. Minimum subscription was N10 million or 10,000 units at N1, 000 per unit while additional subscriptions were in multiples of N1,000 thereafter. While the bond will be redeemed at the end of its five-year tenor, it will pay fixed coupon twice a year. The indicative coupon range for the book building was between 12.25 per cent and 12.50 per cent.

Dangote Cement plans to use the net proceeds of the bond to refinance existing short-term debt previously applied towards cement expansion projects, working capital and general corporate purposes.

The N100 billion bond is expected to be listed on the Nigerian Stock Exchange (NSE) and FMDQ Securities Exchange, paving way for investors to trade on the corporate bond at the secondary market. The listing of the Dangote Cement’s debut bond will further deepen the Nigerian debt capital market, which had seen large-cap issuers like Access Bank Plc, United Bank for Africa, Lafarge Africa and Flour Mills of Nigeria among others.

With more than N530 billion outstanding corporate debt issues and some N400 billion outstanding sub-national bonds, the debt capital market is increasingly becoming a viable source of long-term funding for both corporates and state governments. Dangote Cement’s N100 billion bond is expected to take the outstanding non-sovereign bonds to the psychological N1 trillion mark.

With the success of large-cap issuance like Dangote Cement’s N100 billion, many analysts said the medium to long-term impact of active issuances and trading on the secondary debt market would further open up long-term debt capital to small and medium companies.

Analysts noted that debt-guaranteeing firms like InfraCredit will also help in broadening accessibility for medium sized companies that would otherwise have had challenges accessing the debt capital market due to their size, credit ratings and history. Backed by the Nigeria Sovereign Investment Authority (NSIA), InfraCredit had provided irrevocable guarantee on the bonds of utility-based entities like Viathan Funding SPV and GEL Utility Funding, which raised N10 billion and N13 billion in December 2017 and August 2019 respectively.

Chief Executive Officer, Central Securities Clearing System Plc (CSCS), Mr. Haruna Jalo-Waziri, said the N100 billion bond would further reinforce the depth of the debt capital market and the ability of local corporates to fund long term projects from the domestic debt market.

He said CSCS was excited as the depository to the N100 billion landmark issuance noting that as the depository to about half a trillion-naira outstanding corporate bonds from 23 issuers, CSCS is playing important roles in building issuers’ and investors’ confidence in the domestic debt market.

According to him, with the debut N100 billion bond, Dangote Cement has once again reinforced the capacity of the debt capital market and set a new benchmark in terms of size and pricing of corporate bonds.

“We earnestly look forward to the approved allotment schedule to promptly credit investors’ accounts and provide a consolidated view of all their investments across the capital market,” Jalo-Waziri said.

He pointed out that with CSCS having full coverage of the market, it is well positioned to clear and settle all secondary market transactions on debt notes, notwithstanding the Exchange where such are traded.

Several analysts had rated the N100 billion bond high, almost on comparable terms as comparable Nigerian sovereign debt issuance, citing the strong investment grade rating of bond, AA+ from Global Credit Rating (GCR) and Aa2.ng from Moody’s.

Beyond its impact on the primary market, analysts expected the size and the strong investment grade rating of the Dangote Cement Bond to enhance its secondary market liquidity, especially with its dual listing on the NSE and FMDQ.

Analysts also expected the impact of the debt issuance to be positive for the company’s equity valuation as the net proceeds of the bond will be used to fund expansion projects and refinance existing commercial bank debt, with expected cost-savings and a better realignment of the company’s capital structure.

Dangote Cement’s shares closed on Tuesday at N117 per share, representing 13.7 per cent dividend yield on the company’s final dividend of N16 per share. Qualification date for the dividend is May 25, 2020 while payment is scheduled for June 16, 2020.

With more than 70 per cent market share of the Nigerian cement market and increasing earnings contribution from the African operations, several analysts said Dangote Cement has been positioned for growth. Analysts noted that increasing adoption of the concrete option for road construction in Nigeria and other African countries is expected to drive overall market demand for cement in the period ahead.

Analysts said the double-digit dividend yield presented retail investors opportunity to earn appreciable returns from Dangote Cement’s shares noting that the steep decline in share prices due to Coronavirus and crude oil shocks offers investors good entry prices.

Nigeria’s most capitalised quoted company, Dangote Cement had indicated it would be distributing N272.6 billion to shareholders as cash dividend for the 2019 business year.

Key extracts of the audited report and accounts for the year ended December 31, 2019 showed that turnover dropped from N901.21 billion in 2018 to N891.67 billion in 2019. Gross profit also declined marginally from N517.90 billion to N511.68 billion. Profit before tax stood at N250.48 billion in 2019 as against N300.81 billion in 2018 while profit after tax dropped from N390.33 billion to N200.52 billion.

The report meanwhile indicated that the group’s investments across Africa have started yielding desired results as Pan-African sales volume grew in the year 2019, hitting 9.6 Mt from 9.4 Mt. Dangote Cement Plant, Mtwara, Tanzania, recorded an increase of 94 percent increase in volume within the review period. Dangote Cement Plant, Pout, Senegal put up a remarkable performance with sales up more than 100 percent of rated capacity.

Group Chief Executive Officer, Dangote Cement Plc, Joe Makoju, said the company maintained strong financial performance despite a low growth environment, pricing pressure and increasing competition in key markets.

According to him, the Nigerian operations maintained volume and revenue performance in a challenging environment as export sales were affected by the border closure in the second half of 2019.

“Looking ahead, I expect an increase in volumes in 2020 as we commence clinker exports via shipping from Nigeria. Pan-Africa volumes were slightly up notably supported by Tanzania and Senegal. I am glad to report that Tanzania contributed positively at earnings before interest, tax, depreciation and amortisation (EBITDA) level. In 2020, I believe Dangote Cement will see an increase in profitability in Pan-Africa driven by higher volumes and further efficiency improvements,” Makoju said.

Makoju, who is retiring from the company, noted that Dangote Cement has grown from a local producer back in 2007 to a major force in global cement production pointing out that Dangote Cement has eliminated Nigeria’s dependence on imported cement and has transformed the nation into an exporter of cement serving neighbouring countries.

Dangote Cement is Africa’s leading cement producer with nearly 46Mta capacity across Africa. It is a fully integrated quarry-to-customer producer, with a production capacity of 29.25Mta in its home market, Nigeria. Obajana plant in Kogi state, Nigeria, is the largest in Africa with 13.25Mta of capacity across four lines; Ibese plant in Ogun State has four cement lines with a combined installed capacity of 12Mta and Gboko plant in Benue state has 4Mta.

In addition, Dangote Cement has operations in Cameroon (1.5Mta clinker grinding), Congo (1.5Mta), Ghana (1.5Mta import), Ethiopia (2.5Mta), Senegal (1.5Mta), Sierra Leone (0.5Mta import), South Africa (2.8Mta), Tanzania (3.0Mta), and Zambia (1.5Mta).

 

By Taofik Salako, Capital Market Editor

 

China Harbour Engineering Company (CHEC) one of the shareholders of the Lekki Deep Sea Port Projects under construction at the Lagos Free Trade Zone, Ibeju Lekki, has injected $221.05 million equity fund into Lekki Port LFTZ Enterprise Limited (LPLEL), the special purpose vehicle for the project.

Chairman, Lekki Port LFTZ Enterprise Limited (LPLEL), Mr. Biodun Dabiri, who confirmed the investment, said the fund represents a further commitment by the CHEC following an earlier agreement between both firms signing a $629 million facility agreement for debt financing, with the China Development Bank for the construction of the Port, which will be Sub-Saharan Africa’s deepest port and Nigeria’s first deep sea port.

He said the equity injection came when the world is battling the COVID-19 pandemic showed the deep commitment of CHEC to the success of the project, which  will greatly contribute to fast tracking the timely delivery of the project and bring about economic prosperity to Nigeria as a whole.

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Dabiri also announced the board approval of Du Ruogang as the new Chief Executive Officer for the firm. In his new role as the CEO, Ruogang is expected to oversee the overall business planning, development and management of the company.

In addition to the appointment of Du Ruogang to the board of Lekki Port, other directors appointed are Sajen Aswani, Wu Di, Lu Yunpeng and Xu Huajiang while Mohan Vaswani and Joseph Sanusi resigned.

Other executives appointed by the company include Cai Pingzhen who assumes the position of Chief Financial Officer, Steven Heukelom, as Chief Technical Officer and Binay Saraf as Deputy Chief Financial Officer.

Ruogang, while accepting the appointment, noted that he would collaborate with key stakeholders, including the lenders, insurers, EPC Contractor and government regulators to ensure the smooth and successful development of Lekki Port.

Ruogang, who has has been with CHEC since 2007, has experience in port investment, financing and operation. He holds two bachelor’s degrees in Engineering Management and Industrial Design from Tianjin University, China.

By Taofik Salako, Capital Market Editor

 

Most Nigerian banks have made considerable financial donations to governments’ efforts at containing the ravaging COVID-19 pandemic, with major banks and investors headlining the multi-billion Naira private sector-led campaign.

With the full lockdown in key major economic and political centres of Lagos State and Federal Capital Territory and Ogun State, as well as partial or full restrictions of movements in several states, customers said the biggest relief is the availability of online financial transactions and advisory services from their banks.

While the lockdown provides exemption for banks’ officials, the restriction of movements means that only few can make it to the physical banks’ branches. And with the growing phobia of infectious COVID-19, most customers also prefer to stay at home, leaving them with online banking services.

A customer of Polaris Bank Limited, Mr Olutoyin Ibidun, said the restriction made him to realise how important his bank is to his day-to-day living and business, noting that the ‘stay at home’ brought him closer to his bank to realise how seamless several transactions can be done with just a push of button.

He described Polaris Bank’s tech-driven customer support services as being most helpful during the lockdown pointing out that he was not only able to activate his business continuity plan and run it online but also received advice on post-Covid-19 management.

As major contact areas for people,  banks have also increased on their traditional aesthetics and hygiene, with provision of Covid-19 specific neutralisers and detectors, such as hand sanitisers, thermometer guns, disinfectants, and increased cleaning of major touch-points outside and within the banking halls. Visits to many branches of banks also showed security officials persuasively enforcing the social distancing.

Besides, on the back of huge data base of customers, banks are also leading the social media campaign to disseminate information on preventive measures against Covid-19 pandemic. A social campaigner and analyst, Miss Patricia Peters, said banks have justified their roles as cultural influencers with the huge wave of awareness they have been mobilising on the social media.

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She noted that while financial donations will help to provide infrastructure and other medical requirements to tackle the pandemic, the most potent weapon to stop the spread is adequate awareness within the populace.

Another customer, Mrs Tayibat Ibrahim, said she was excited when she received almost three mails from her bank, Polaris Bank, offering concessions on her loan obligations. She said the sensitivity displayed by the bank lifted a huge burden from her mind, saying, the relief from the bank was the best palliative for her as a small and medium business owner.

In a message signed by Managing Director of Polaris Bank, Mr Adetokunbo Abiru, the bank reiterated its support for all efforts to end the Covid-19 pandemic, promising that it will lend its institutional resources as well as expertise and diversity of its staff to help governments and other stakeholders win the fight against Covid-19 pandemic.

Polaris Bank stated that while Central Bank of Nigeria’s guide to bank charges allows for one per cent flat penalty for loan repayments due and not met, the bank eased the pressure on its customers by waving the charge in its entirety for its customers during this trying period of Covid-19.

“This forbearance, which is for a period of 90 days, takes a retroactive effect from March 1, 2020. Polaris Bank will continue to support and partner with you beyond Covid-19,” the bank stated.

According to the bank, it recognises  that there will be operational challenges that may threaten the customers and thus resolved to support them to ensure they are in better position to meet their loan repayment obligations in orderly and realistic manners.

The bank urged customers to contact their relationship managers for any need to reorganise or restructure their loans.

For bank customers, Covid-19 disruptions take them away from the  bricks and mortars, but bring them closer to the real nature of their banks as partners for all times.

By Taofik Salako, Capital Market Editor

Sterling Bank Plc grew its net profit by 15 per cent to N10.6 billion in 2019 as the commercial bank sustained steady growths across key performance indicators.

The board of directors of the bank has recommended distribution of N863.7 million as cash dividend for the 2019 business year, representing a dividend per share of 3.0 kobo for all shareholders on the register of the bank as at Monday, May 4, 2020.

Key extracts of the audited report and accounts of Sterling Bank for the year ended December 31, 2019 released at the weekend showed that gross earnings rose from N148.7 billion in 2018 to N150.2 billion. Profit before tax increased from N9.49 billion to N10.67 billion. Profit after tax rose from N9.22 billion in 20189 to N10.6 billion in 2019.

Chief Executive Officer, Sterling Bank Plc, Mr. Abubakar Suleiman, said the bank’s top-line growth was driven majorly by growth in fees and commissions by 24.3 percent, despite a steady loan base – as it continues to diversify into key sectors of focus – and a decline in trading income.

According to him, last year, the bank delivered more than 200 per cent increase in loans to its retail and consumer segment with its Loan-to-Deposit Ratio (LDR) above the regulatory limit all year round.

He noted that the bank’s digital lending product continued to set the trend with more than N45 billion disbursed to more than 50,000 customers.

He pointed out that interest expense declined by 10.9 per cent driven by a 19.4 per cent increase in low-cost deposits as the bank continues to grow its retail and consumer base, resulting in a 110 basis points drop in the cost of funds and consequently, a 130 basis points increase in net interest margin.

He added that the bank’s cost-to-income ratio remained relatively flat during the year even as operating expenses grew on the back of staff salaries and wages and spend on technology infrastructure as well as digital platforms.

Suleiman pointed out that the bank grew its deposit base by over N130 billion in deposit during the 12-month period, representing over 75 per cent growth from its 2018 performance of about N75 billion, while shareholders’ funds grew by 22.2 per cent at the end of the year.

He said investments in technology have allowed the bank to continuously record steady growth in the instant payments market, thus contributing to the bank’s transactional revenue.

“Also, the bank has continued to see traction in machine supported transactions, driven by the adoption of its digital channels. As a direct result, Sterling’s NIBBS Instant Payments (NIP) transaction volume grew by 78 per cent compared to the previous year, faster than the industry growth while recording the fastest growth in fees and commission income in comparison with its peers,” Suleiman said.

Further analysis showed that in comparison with its peers, Sterling Bank delivered the highest percentage growth in terms of savings deposits and second highest in terms of total low-cost deposits.

In the final quarter of last year, the bank’s relentless commitment to improving education through micro banking was rewarded with ‘The Banker’s Award for Banking in the Community’ by the Financial Times of London. The bank was also ranked ‘top three banks in retail’ by Nigerian consumers in a KPMG banking survey.

Golden Guinea Breweries suffered a fire outbreak in 2003 which led to a closure of the plant. Successive governments in Abia State set in motion the ground for its eventual resuscitation.

 

By Taofik Salako, Capital Market Editor

Nigeria’s apex capital market regulator, Securities and Exchange Commission (SEC) will henceforth impose sanction on any capital market operator or company that alters approved transaction document without approval of the Commission.

In a circular, SEC stated that any request for any change in an approved transaction document must be duly made to the Commission for its prior approval before effecting any such change, warning that altering approved transaction document without prior approval will attract sanctions.

According to the Commission, where any change is made to a transaction document after same has been approved or cleared by the Commission without the prior approval of the Commission, the relevant parties shall be sanctioned in accordance with the rules and regulations of the Commission.

“The Commission expects strict compliance with this directive,” SEC stated.

SEC noted that in addition to the complete filing directive of the Commission, all requests for amendments to transaction documents after approval or clearance by the Commission shall attract additional processing fee.

According to SEC, any request for a change, alteration, or amendment of documents after approval and clearance has been granted shall attract a processing fee of N1 million.

Meanwhile, the apex capital market regulator has clarified that “light refreshments” at annual general meetings (AGMs) are not considered as part of gifts prohibited under its rules banning distribution of gifts at AGMs.

Rule 602(4) of SEC states that ‘’public companies shall not distribute gifts to shareholders, observers and any other person at Annual General Meetings/Extra-Ordinary General Meetings’’.

The Commission stated that it considered it necessary to clarify that ‘’light refreshments’’ are not prohibited and do not fall under category of gifts prohibited by Rule 602(4).

With several cases of disruptions due to distribution of gifts at AGMs and alleged unethical behaviours by companies, SEC had issued new rules banning distribution of gifts and engaging any caucus of shareholders in group meeting prior to any of the general meeting.

Any company that violates the two rules shall be liable to a penalty of not less than N10 million.

Providing justification for the proposed rules, SEC stated that public companies spend a significant amount of money on corporate gifts at AGMs and EGMs and this has a great impact on their profitability.

SEC noted that few of the companies are making reasonable profits and even fewer can afford to pay dividends, adding that if the amount budgeted for gifts at AGMs or EGMs can be reserved for other relevant operational or administrative expenses, it would positively impact on the companies’ earnings per share.

“Furthermore, it has been observed that some companies arrange meetings with select groups of shareholders ahead of general meetings to discuss proposed resolutions and agree on strategies which are often detrimental to the interest of other shareholders,” SEC stated. Such meeting is known as pre-AGM meeting.