The Nation Newspaper

Tag: companies

  • Insecurity: Companies count losses as earnings decline

    As the security forces battle to clear the remnants of insurgents in some Northern states, companies have fingered the insecurity in the Northern region as one of the major contributors to widespread decline in corporate earnings.

    Full-year audited report and accounts of several quoted companies for the 2014 business year and earnings reports for the first quarter of 2015 showed a largely tepid performance. Besides declines in sales, the profitability of several companies also dwindled. The low performance trend was particularly visible in the results of companies with nationwide business model, especially those with substantial Northern operations.

    For instance, key extracts of the audited report and accounts of Learn Africa for the year ended December 31, 2014 showed that turnover dropped marginally to N2.21 billion in 2014 as against N2.28 billion in 2013. Profit after tax halved from N100.13 million to N58.68 million.

    Also, during the same period, Cadbury Nigeria’s turnover dropped from N35.76 billion in 2013 to N30.52 billion in 2014. Profit before tax slumped to N1.47 billion as against N7.42 billion while profit after tax declined from N6.02 billion to N1.51 billion. Earnings per share thus dropped from N1.92 to 75 kobo.

    Nestle Nigeria’s turnover rose by eight per cent from N133.08 billion in 2013 to N143.3 billion in 2014. Profit before tax however dropped from N26.05 billion in 2013 to N24.4 billion in 2014. Profit after tax was almost unchanged at N22.24 billion in 2014 as against N22.26 billion in 2013.

    Unilever Nigeria’s turnover dropped by seven per cent from N60 billion in 2103 to N55.75 billion in 2014. Pre-tax profit dropped by 58 per cent from N6.79 billion to N2.87 billion. After a 78 per cent reduction in tax provisions, net profit after tax dropped by 49 per cent to N2.41 billion in 2014 as against N4.72 billion recorded in 2013. Earnings per share consequently dropped from N1.25 in 2013 to 64 kobo in 2014.

    Also, the audited report of Dangote Sugar Refinery indicated that turnover dropped from N103.15 billion in 2013 to N94.86 billion in 2014. Profit before tax also slipped from N16.27 billion in 2013 to N15.27 billion in 2014. However, with reduction in tax provisions, net profit increased from N10.85 billion to N11.64 billion. With this, earnings per share rose marginally from 90 kobo to 97 kobo.

    In the first quarter of 2015, the Gombe-based Ashaka Cement, which had once come under attacks by the insurgents, reported that first quarter sales dropped to N4.56 billion in 2015 as against N6.51 billion recorded in comparable period of 2014. Profit after tax also slipped to N889.01 million compared with N1.92 billion in corresponding period of 2014.

    Managing director, Learn Africa Plc, Mr. Segun Oladipo said companies have had to scale down or completely close their operations in some Northern states because of the deadly activities of the insurgents, which have destroyed economic and commercial activities in the affected states.

    According to him, the frequent bombings and clashes between Boko Haram members and the law enforcement agents have forced many companies to close their offices while others have substantially reduced their operations and business hours.

    “The general feelings of uncertainty and insecurity in those areas have made many investors to relocate their businesses to safe areas. As a company, we are greatly concerned about this terrible situation which has limited our promotional activities and revenue generation efforts. Our sales and marketing operatives have not been able to move extensively in order to sell the full benefits of our excellent learning resources to the teachers, school administrators and other influential persons in the educational sector. As a matter of fact, several schools have been closed down due to the destruction of facilities, widespread killings and threats to the lives of students and their teachers,” Oladipo noted.

    He added that bookshops and other sales outlets have stopped operating due to high level of insecurity while many of the teachers in those areas have also lost the opportunity to update their knowledge and upgrade their skills through attendance at capacity building events like the seminars and workshops that his company usually organises in several locations across Nigeria.

    He pointed out that many of the state governments that used to buy books in bulk for distribution among students in their public schools have stopped doing so as they are now allocating more resources to fighting the criminal elements in order to guarantee security of lives and properties. This represents loss of significant business to a company like Learn Africa.

    “We have reduced our business activities in the troubled areas in order to protect the lives of our employees and our company’s assets,” Oladipo said.

    He, however, said the company has been taken measures to mitigate the adverse impact of the insecurity crisis on its earnings by allocating more resources to the identification and exploitation of business opportunities in other parts of the country.

    According to him, more sales representatives have been employed to saturate schools in the safe areas with vigorous promotions of the company’s new and backlist titles while the company has purchased additional vans to enable the mobile sales teams to distribute products to wider areas.

  • Insecurity: Companies count losses as earnings decline

    As the security forces battle to clear the remnants of insurgents in some Northern states, companies have fingered the insecurity in the Northern region as one of the major contributors to widespread decline in corporate earnings.

    Full-year audited report and accounts of several quoted companies for the 2014 business year and earnings reports for the first quarter of 2015 showed a largely tepid performance. Besides declines in sales, the profitability of several companies also dwindled. The low performance trend was particularly visible in the results of companies with nationwide business model, especially those with substantial Northern operations.

    For instance, key extracts of the audited report and accounts of Learn Africa for the year ended December 31, 2014 showed that turnover dropped marginally to N2.21 billion in 2014 as against N2.28 billion in 2013. Profit after tax halved from N100.13 million to N58.68 million.

    Also, during the same period, Cadbury Nigeria’s turnover dropped from N35.76 billion in 2013 to N30.52 billion in 2014. Profit before tax slumped to N1.47 billion as against N7.42 billion while profit after tax declined from N6.02 billion to N1.51 billion. Earnings per share thus dropped from N1.92 to 75 kobo.

    Nestle Nigeria’s turnover rose by eight per cent from N133.08 billion in 2013 to N143.3 billion in 2014. Profit before tax however dropped from N26.05 billion in 2013 to N24.4 billion in 2014. Profit after tax was almost unchanged at N22.24 billion in 2014 as against N22.26 billion in 2013.

    Unilever Nigeria’s turnover dropped by seven per cent from N60 billion in 2103 to N55.75 billion in 2014. Pre-tax profit dropped by 58 per cent from N6.79 billion to N2.87 billion. After a 78 per cent reduction in tax provisions, net profit after tax dropped by 49 per cent to N2.41 billion in 2014 as against N4.72 billion recorded in 2013. Earnings per share consequently dropped from N1.25 in 2013 to 64 kobo in 2014.

    Also, the audited report of Dangote Sugar Refinery indicated that turnover dropped from N103.15 billion in 2013 to N94.86 billion in 2014. Profit before tax also slipped from N16.27 billion in 2013 to N15.27 billion in 2014. However, with reduction in tax provisions, net profit increased from N10.85 billion to N11.64 billion. With this, earnings per share rose marginally from 90 kobo to 97 kobo.

    In the first quarter of 2015, the Gombe-based Ashaka Cement, which had once come under attacks by the insurgents, reported that first quarter sales dropped to N4.56 billion in 2015 as against N6.51 billion recorded in comparable period of 2014. Profit after tax also slipped to N889.01 million compared with N1.92 billion in corresponding period of 2014.

    Managing director, Learn Africa Plc, Mr. Segun Oladipo said companies have had to scale down or completely close their operations in some Northern states because of the deadly activities of the insurgents, which have destroyed economic and commercial activities in the affected states.

    According to him, the frequent bombings and clashes between Boko Haram members and the law enforcement agents have forced many companies to close their offices while others have substantially reduced their operations and business hours.

    “The general feelings of uncertainty and insecurity in those areas have made many investors to relocate their businesses to safe areas. As a company, we are greatly concerned about this terrible situation which has limited our promotional activities and revenue generation efforts. Our sales and marketing operatives have not been able to move extensively in order to sell the full benefits of our excellent learning resources to the teachers, school administrators and other influential persons in the educational sector. As a matter of fact, several schools have been closed down due to the destruction of facilities, widespread killings and threats to the lives of students and their teachers,” Oladipo noted.

    He added that bookshops and other sales outlets have stopped operating due to high level of insecurity while many of the teachers in those areas have also lost the opportunity to update their knowledge and upgrade their skills through attendance at capacity building events like the seminars and workshops that his company usually organises in several locations across Nigeria.

    He pointed out that many of the state governments that used to buy books in bulk for distribution among students in their public schools have stopped doing so as they are now allocating more resources to fighting the criminal elements in order to guarantee security of lives and properties. This represents loss of significant business to a company like Learn Africa.

    “We have reduced our business activities in the troubled areas in order to protect the lives of our employees and our company’s assets,” Oladipo said.

    He, however, said the company has been taken measures to mitigate the adverse impact of the insecurity crisis on its earnings by allocating more resources to the identification and exploitation of business opportunities in other parts of the country.

    According to him, more sales representatives have been employed to saturate schools in the safe areas with vigorous promotions of the company’s new and backlist titles while the company has purchased additional vans to enable the mobile sales teams to distribute products to wider areas.

  • Companies get 20-day deadline to submit annual reports

    Companies get 20-day deadline to submit annual reports

    Quoted companies on the Nigerian Stock Exchange (NSE) have about 20 working days to submit their audited report and accounts for the immediate past business year to the regulators and the general investing public.

    The Nation’s check indicated that only two quoted companies have so far submitted their annual reports and accounts, representing less than one per cent of the companies that are quoted on the two boards of the NSE. Forte Oil had blazed the trails two weeks ago while Nestle Nigeria followed last week.

    Post-listing rules at the NSE require quoted companies to submit their earnings reports, not later than three months after the expiration of the period. Most quoted companies including all banks, major manufacturers, oil and gas companies, breweries and cement companies use the 12-month Gregorian calendar year as their business year. The business year thus terminates on December 31.

    NSE’s regulatory filing calendar indicates that the deadline for submission of annual report for companies with Gregorian calendar business year is Tuesday, March 31.

    Any company that fails to meet the March 31, 2015 deadline will be liable for both monetary sanction and NSE’s “naming and shaming” tagging of non-compliant companies. Besides, compliance with the deadline is generally regarded as a measure of good corporate governance.

    However, the NSE can grant general waiver and extension of the deadline while individual company can also apply for waiver and extension of the deadline.

    A source at the Exchange said the NSE has seen no reason for any extension or waiver.

    The NSE had slammed some N60.2 million as fines on 34 companies for failure to meet deadlines for 2011 audited reports. With a range of N3.8 million and N100, 000, average fine for the year was N1.77 million.

    NSE tags and applies fines on companies that fail to meet earnings reports’ deadline. Under the corporate governance and rules compliance assessment report known as X-Compliance Report, NSE identified four different kinds of tags or symbols to alert investors about the status of each quoted company. These include below listings standard (BLS), the first degree alert level indicating a company that has not complied with post listing rules such as late submission of financial statements, unauthorized publication, and management failures among others.

    Also, financial services companies such as bank and insurance companies awaiting regulatory approval will carry the appropriate symbol of awaiting regulatory approval (ARA). Companies that are undergoing a capital reconstruction exercise including supplementary issue, share buyback, split, share reconstruction among others will be tagged with capital reconstruction exercise (CRE) while companies that have indicated that they will be delisting or companies that are being delisted at the instance of the regulator would be flagged with delisting in process (DIP) symbol.

    Market sources said they expected the filing of annual reports to pick up considerably as from this week noting that several companies have been finalising arrangements to submit their reports in time to beat the deadline.

    According to sources, several companies are expected to call their final board meeting for the endorsement of the audited report and accounts in the next two weeks.

    Already, the board of directors of BOC Gases has indicated that it would meet next Monday to consider the audited accounts of the company for the year ended December 31, 2014. The meeting is also expected to consider the issue of dividend declaration at the meeting.

    Forte Oil had set the trend for earnings release and dividend recommendation two weeks ago. The board of the oil and gas company recommended distribution of about N2.7 billion in cash dividends and 216 million ordinary shares of 50 kobo as bonus shares for the 2014 business year. Shareholders will receive a dividend per share of N2.50 and bonus shares of one share for every five ordinary shares currently held.

    The board of directors of Nestle Nigeria last week recommended distribution of N13.87 billion to shareholders as final dividends for the immediate past business year ended December 31, 2014. Nestle Nigeria had earlier distributed N7.93 billion as interim dividends. This final dividend recommendation brought total dividend for the year to N21.8 billion.

    A breakdown of the dividend recommendation showed that shareholders would receive a final dividend per share of N17.50, bringing total dividend per share for the year to N27.50. The final dividend is expected to be approved by shareholders at the company’s annual general meeting on May 11, 2015 and will subsequently become payable as from May 12, 2015 to shareholders on the register of the company as at the close of business on Friday, 24 April 2015.

    The final dividend is being paid from the pioneer profits of the company and as such not subject to deduction of withholding tax.

     

     

     

  • Botswana coal companies see output without new rail line

    Coal explorers in Botswana are pressing ahead with plans to start production and use existing rail capacity to ports in South Africa and Mozambique instead of waiting for a line being built to Namibia, the mines lobby said.

    “You cannot sit down and wait for the Trans-Kalahari Railway; that would be a disaster,” Botswana Chamber of Mines Chief Executive Officer Charles Siwawa said in a Jan. 21 interview in Gaborone, the capital. “The thing to do is to move on the available capacity and all of them are trying.”

    Namibia, on the continent’s southwestern coast, and Botswana are jointly developing the 1,500-kilometer (932-mile) Trans-Kalahari Railway to transport coal from the east of the landlocked country to markets in China and India. Mozambique and South Africa, the world’s seventh-largest coal producer, have offered 20 million metric tons of annual railing capacity to Botswana.

    Producers in Botswana will rail the fuel to the port in Mozambique’s capital, Maputo and Richards Bay in South Africa, Siwawa said, without providing more information. The coal terminal at Matola in Maputo has capacity of 7.5 million tons annually, Grindrod Ltd., the terminal operator that’s continent’s biggest shipping company, said on its website.

    Richards Bay Coal Terminal Ltd., the world’s largest export facility for the fuel, is on South Africa’s northeast coast, with Glencore Plc as the biggest shareholder. Grindrod operates the Navitrade terminal at Richards Bay with RBT Resources (Pty) Ltd. and is developing this into a fully mechanized coal facility with eventual capacity of 20 million tons a year.

    The production plans come as global supply of the fuel exceeds demand. U.S., European and Asian price for power-plant coal, which Botswana has, the have fallen for four consecutive years, while the metallurgical variety, used to forge steel, has dropped for three.

    “Sitting back and waiting for the coal price to improve is unwise, as we believe we have hit the bottom now and the only way is up,” Siwawa said. “Producing now would help them work out the logistics when the Trans-Kalahari is developed as you cannot simply wake up and supply the 60 million tons per annum it will require.”

    Of the seven coal companies active in Botswana, two are at exploration stage and four at pre-feasibility. Jindal Africa, a unit of India’s Jindal Steel & Power Ltd. (JSP) received a mining license in August and plans to start production for export next year. Shumba Coal Ltd., Hodges Resources Ltd., Walkabout Resources Ltd., African Energy Resources Ltd. and Minergy Ltd. are among the companies.

     

  • ‘Expect no spectacular dividends from companies’

    ‘Expect no spectacular dividends from companies’

    Quoted companies may not declare any spectacular dividend this year as corporate earnings had been impaired by many macroeconomic and regulatory issues.

    Analysts at leading investment firms said their expectations on dividend payouts ranged from modest to poor, noting that while some companies may retain earlier payout rates, others may be forced to reduce their payouts.

    Head, research and intelligence, BGL Plc, Mr. Femi Ademola said there were no strong prospects for any major increase in dividend payouts in the immediate period given the performance of the companies as shown by interim results released so far.

    According to him, 2014 was not a very strong year in terms of corporate performance and as such there is no expectation of a spectacular performance from listed companies more than what was experienced in the previous year.

    Ademola noted that regulatory rules, poor power supply, crude oil price crisis and insecurity had combined to weaken corporate performance.

    “Regulatory headwinds in the banking sector would only allow modest growth in earnings if at all for 2014 while disruptions to energy source would affect performance of companies involved in industrial goods. Oil companies face the problems with oil price decline despite growing expenses,” Ademola said.

    He however noted that consumer goods companies are expected to outperform other sectors in terms of dividend payouts.

    Group head, research, Lead Capital Plc, Mr. Sadiq Waziri, said the current high lending rates and devaluation of the national currency would undermine returns to investors.

    He said dividends and returns to investors, especially real returns, may be poor given the economic situation under which companies are operating.

    Managing director, Finawell Capital Limited, Mr. Tunde Oyekunle, however noted that the current bearishness may result in high dividend yield for investors, although corporate performance may be low.

    According to him, expectation on corporate earnings should be a little above average in respect of dividend yield since most stocks are currently trading above their intrinsic value. However, while dividend yield may be, total earnings may be equivalent to or drop slightly below the performance in 2013.

    Quoted companies are expected to start announcing their earnings results for the year ended December 31, 2014 later this month.

    Post-listing rules at the Nigerian Stock Exchange (NSE) require quoted companies to submit their earnings reports, not later than three months after the expiration of the period. Most quoted companies including all banks, major manufacturers, oil and gas companies, breweries and cement companies use the 12-month Gregorian calendar year as their business year. The business year thus terminates on December 31.

    NSE’s regulatory filing calendar indicates that the deadline for submission of annual report for companies with Gregorian calendar business year will be Tuesday March 31. NSE maintains a strict compliance regime on earnings report. It tags and applies fines on companies that fail to meet earnings reports’ deadline.

    Under the corporate governance and rules compliance assessment report known as X-Compliance Report, NSE identified four different kinds of tags or symbols to alert investors about the status of each quoted company. These include below listings standard (BLS), the first degree alert level indicating a company that has not complied with post listing rules such as late submission of financial statements, unauthorised publication, and management failures among others.

    Also, financial services companies such as bank and insurance companies awaiting regulatory approval will carry the appropriate symbol of awaiting regulatory approval (ARA). Companies that are undergoing a capital reconstruction exercise including supplementary issue, share buyback, split, share reconstruction among others will be tagged with capital reconstruction exercise (CRE) while companies that have indicated that they will be delisting or companies that are being delisted at the instance of the regulator would be flagged with delisting in process (DIP) symbol.

  • Companies reconsider new capital raising over declining share prices

    The bearish market at the Nigerian stock market is forcing companies that had planned to float new offer and raise new funds to reconsider their plans, a development that could reverse the modest level of activities at the primary market.

    Nigerian equities lost N1.44 trillion last week as foreign portfolio outflows exacerbated a downtrend that had seen the market mostly with month-on-month negative performance this second half. In spite of the marginal average gain of 0.03 per cent on Monday, most equities opened yesterday at their lowest values in a year.

    Investment banking sources said many companies that have recently launched new offers were reconsidering their pricing in the face of the bearish market at the Nigerian Stock Exchange (NSE).

    They said some companies were favourably disposed to delaying their new issues because of the significant undervaluation of their fundamentals by the losing spree.

    Not less than seven companies have new issues in the pipeline including Access Bank Plc, United Bank for Africa (UBA), Sterling Bank, Presco, Vitafoam, RT Briscoe and Cement Company of Northern Nigeria.

    Presco Plc, which had initially indicated it planned to raise some N3 billion at a price of N35 per share opened yesterday at the NSE at a low of N24.82 per share, significantly lower than its proposed offer price. Also, Sterling Bank Plc, which held an extraordinary general meeting on a planned new issue yesterday, opened yesterday at N2.31 per share, lower than its planned offer price. Also, RT Briscoe opened around its nominal price at 66 kobo per share while UBA and Access Bank are trading around their lowest prices in a year.

    Presco, a palm oil plantation and processing company, has already commenced the process to raise some N3 billion new equity funds from its major core investor and other minority shareholders to reorganize its highly leveraged capital structure.

    The shareholders of the company had in July this year approved the supplementary share issuance at their annual general meeting in Benin, Edo State. At the annual general meeting, shareholders had also approved the increase in the authorised share capital of the company from N500 million to N550 million through the creation of 100 million ordinary shares of 50 kobo each.

    Managing director, Presco Plc, Mr. Uday Pilani, confirmed the commencement of the rights issue noting that the board had decided to undertake the new equity raising to give the company financial flexibility and reorganise its capital structure.

    According to him, the net proceeds of the rights issue will be used to reduce the company’s debt and foreign exchange exposure.

    Directors of the company had expected the rights issue to receive overwhelming support noting that it presented an excellent opportunity for existing shareholders to increase their investment in the company.

    While the current details of the rights issue are sketchy, initial check by The Nation indicated that the rights issue will be pre-allotted to shareholders on the register of the company as at July 4, 2014 on the basis of one new share for every 10 shares held as at the qualification date. Directors of the company had also earlier indicated the rights would be offered at N35 per share.

    However, initial outlined had indicated that in the event of under-subscription of the rights issue, shareholders will not have any pre-emptive right, paving the way for other investors to acquire the unsubscribed shares. The underwriter to the rights issue will be able to acquire the unsubscribed shares, subject to the approval of the regulatory authorities.

    Also, Sterling Bank yesterday held an extraordinary general meeting of its shareholders in furtherance of its plan to raise about N50 billion in a new round of capital raising. Sterling Bank plans to raise about N20 billion through a special placement to identified strategic investors and more than N30 billion in another yet-to-be-specified instrument.

    According to the resolution, the bank plans to issue about 7.472 billion ordinary shares of 50 kobo each at N2.65 per share to Messrs. Silverlake Investments Limited or such other identified strategic investor. However, the opening price of N2.31 yesterday represented a discount of about 13 per cent to the planned offer price.

    In another resolution, the board of the bank sought to raise additional capital up to $200 million or its equivalent in Naira. The fund could be raised through any or a combination equity, global depository receipts, quasi equity, convertible loans, medium term notes, bonds and any other debt instrument.

    Head, research and investment advisory, Sterling Capital Markets, Mr. Sewa Wusu, however said that in as much as the changing price dynamics at the NSE will affect pricing of new issues, some offers may come at premium to the market prices since the prices were based on fundamental valuation.

  • BoI blacklists 24 companies

    BoI blacklists 24 companies

    • Industrialists hail bank’s supportive role

    The Bank of Industry (BoI) has placed a total of 24 companies on its blacklist for failing to repay the loans borrowed from the bank.

    The Managing Director of the Bank, Mr. Rasheed Olaoluwa, made this disclosure at the weekend, during the induction of 10 customers who made it into the bank’s hall of fame.

    He said the bank has decided to name and shame these bad customers, to help banks in the country identify business people who have no respect for integrity and purpose.

    “Unfortunately, there are two sides of a coin. Just as we have had exemplary customers, we have also had the very bad and difficult ones. Some of these customers provided cloned title documents, thus committing outright frauds,” he said, adding: “In addition to naming these companies, we have taken the additional step of also unveiling their directors and shareholders, such that other leading institutions and credit bureaus are sufficiently put on notice.”

    “A total of 24 companies have been so identified, and they will henceforth experience the ignominy of belonging to our hall of shame. Their names have also been published on our website.”

    He added that the 10 companies to be inducted into the hall of fame obtained long-term credit facilities from the bank at least twice and have fully repaid the loans as and when due, maintaining that they have proven that integrity is not a function of size nor of the business environment.

    “They have shown considerable honour and character that we commend and applaud. We do not blacklist just because we want to, we blacklist those that have no respect for integrity and not worthy of doing credible business with. As a bank, our hope and prayer is that we increase the number of customers in the hall of fame and minimise the blacklist,” he said.

    He said it is against this background that the BoI have decided to introduce a scheme to honour some of its customers who have shown excellent performance by fully repaying the loans granted to them by BoI as and when due.

    “Our Board of Directors has approved the establishment of a hall of fame into which exemplary and outstanding customers, big and small, shall be inducted. We, development   banks, derive our funding, not from millions of depositors but from government funding, which is provided from government resources that are limited, finite and subject to competing demands,” he stated.

    He therefore pointed out that the effect of any loan default is more severe, with certain socio-economic consequences which are capable of defeating government’s laudable objectives of financing the strategic sectors of the economy, promoting Small and Medium Enterprises (SMEs) and creating jobs for Nigerians.

    “Therefore, when customers default on their loans, they deprive other Nigerian businesses of the much needed access to finance,” he stressed.

    Responding, CEO, Innoson Technical and Industrial Company Limited, a company with interests in automobiles and plastic components production, hailed BoI for supporting industries in giving out loans on single digit figure unlike the commercial banks.

  • Why Nigerian companies remain ‘local champions’

    Why Nigerian companies remain ‘local champions’

    Integrity in business is an issue that is key to companies becoming global brands. This virtue is believed to be in short supply in Nigeria’s business landscape. Experts believe there must be a paradigm shift if companies seek to become international brands, reports Assist. Editor Chikodi Okereocha

    The  World Economic Forum (WEF) Global Competitiveness Report’ for 2014/2015 period ranked Nigeria 127 of 147 countries. The country did not fare well on the issue of diversion of public fund. The country only performed better than two countries: Venezuela and Argentina at 142nd position.

    This was a major source of concern for the Director-General of the Securities and Exchange Commission (SEC), Ms. Arunma Oteh, when she spoke at he 2nd Christopher Kolade Lecture series on business integrity, and the theme of the lecture, ‘The Business Case for Business Integrity’.

    Ms Oteh, a former employee of the African Development Bank (AfDB), examined the ethical foundations businesses in Nigeria need to put in place to ensure that the net effect on all their stakeholders, including shareholders, government, regulators, business partners, communities of interest and the general public, is a positive one.

    In her presentation, the Amazon of SEC said Nigerian firms ranked low on ethical behaviours. For instance, Nigeria, she disclosed, ranked 132, of 144 countries, on a study on ethical behaviour of firms. While South Africa ranked 35, China ranked 55, leaving India and Brazil with 58 and 107.

    Ms Oteh said “We must focus on bringing about a paradigm shift in our country when it comes to proper conduct. To become competitive and remain relevant in today’s global economy, our companies and public institutions must not only imbibe international best practices, but exceed them by setting the highest standards of conduct.”

    She added that this has become imperative for many reasons. First, integrity, she pointed out, is an enabler of sustainable profitability. She observed that businesses that act with integrity are long term sustainable businesses while those that do not– for the purpose of short term gains–will eventually run out of business. “There are several studies showing companies that pay greater attention to integrity actually having better financial performance even in the short run than companies who do not. It should not be a choice to be ethical or be profitable. There is no question that businesses can and must be both,” she said, stressing that integrity is absolutely critical in business, and is as important as the quality of a company’s products and services in shaping its reputation.

    Secondly, integrity is valued by all categories of stakeholders of a business.

    She said: “Shareholders clearly want their business to be properly governed, investors place a premium on companies that set and maintain the highest standards, the best talents want to work for ethically sound companies that they can trust, the government, regulators and civil society also appreciate and reward integrity in business. Above all, the customer who businesses aim to please values how a company conducts itself. When a company successfully builds a reputation of integrity the benefits flow from across the spectrum of stakeholders. It can enjoy customer preference when other companies’ products or services are available at a similar cost and quality. It can charge a premium for its products and services; count on support from stakeholders in times of controversies; and reap value appreciation in the financial markets.”

    The SEC boss said integrity helps build up ‘reputational capital’ which is an important component of an organisation’s value. According to her, there is a growing list of empirical evidence proving that integrity, embedded in sound governance, is a game-changer for businesses. “An analysis of 1,600 top companies in the MSCI World Index found that well-governed companies who pay attention to integrity tended to outperform poorly governed companies by an average of 30 basis points per month between 2008 and 2013. Another recent study published on the Harvard Corporate Governance blog found that high levels of integrity in an organisation are positively correlated with good outcomes, in terms of higher productivity, profitability, better industrial relations, and higher levels of attractiveness to prospective job applicants.”

    Ms Oteh believes that given Nigeria’s robust economic growth, large population, and rich human and material resources, companies can carve a niche for themselves by building corporate reputations anchored on integrity and adherence to international best practices. She observed, for instance, that apart from Nigerian companies being regional leaders operating in Africa’s largest economy and the world’s most promising region, there has never been a better time to be in business within the Nigerian economy that has enjoyed over 13 years of robust economic growth above seven per cent per annum. Also, Nigeria, she said, is home to Africa’s largest population with over 170 million people.

    She explained further: “We have very promising demographics where the median age is just 18 and over 70 per cent of the population is below the age of 30. Nigerians are exceptionally enterprising and more than half of the population now lives in the cities. We have a growing middle class currently estimated at 23 per cent of the population – 39 million people. With the rich natural and human endowments at our disposal, our country has been listed among the Next-11 and the MINT (Mexico, Indonesia, Nigeria and Turkey) nations.

    “Nigeria is projected to have a nominal Gross Domestic Product (GDP) of $4 trillion by 2050, overtaking countries like Italy, Spain and Canada. Government reforms have engendered a macroeconomic stability, which is supportive of robust economic growth. Inflation has remained in single digits for over two years now, fiscal prudence is maintaining enviable debt-to-GDP and budget deficit levels, while buffers have been built to support a more stable exchange rate for the Naira.”

    Despite these intimidating credentials that are capable of boosting Nigeria’s competitiveness provided businesses are built on sound integrity, Oteh expressed regrets that corruption and illicit financial flows remain two issues hindering the nation’s progress. “Corruption has been identified as the second most problematic factor to doing business in Nigeria ahead of factors including access to finance and terrorism. This year, the G-20 is focusing on combating illicit financial flows especially considering the fact that poor countries (Nigeria inclusive) are losing over $1 trillion every year to such illegal activities as money laundering, tax evasion, transfer pricing and embezzlement,” she said.

    While lamenting that this is money desperately needed for the Millennium Development Goals (MDG), as it could prevent as much as 3.6 million deaths annually in the world’s poorest countries, she said Nigeria has lost more to illicit financial flows than any other African country between 2002 and 2011, even being listed in the top 10 globally. She disclosed that while Nigeria needs an estimated $50 billion investment to ensure stable electricity, the country lost over $140 billion to illicit financial flows within a period of nine years.

    “A lot of it was lost through the illicit commercial activities of multinational companies. We now have a situation where these illicit outflows are not only depriving our country of desperately needed capital but are also being used to finance terrorism abroad and within our shores,” she disclosed, adding some pieces of intelligence from a security expert who recently trained her staff at SEC indicate that the dreaded Islamic sect Boko Haram received over $70 million between 2006 and 2011 through shady activities like money laundering, oil bunkering, kidnapping and dealing in drugs.

    The intelligence also listed Boko Haram as the 7th richest terrorist organisation in the world. Oteh however, said efforts have been made to strengthen the Anti-Money Laundering and Countering the Financing of Terrorism (AML/CFT) regime in Nigeria. She added that to correct the reputational deficit, which Nigeria suffers as a result of lack of integrity in doing business, “We must make the cost of doing the wrong thing high.”

    While participants at the forum expressed divergent views on how to advance business integrity, a common thread that ran through their presentations was that integrity in business is an idea whose time has come, and that it is non-negotiable. For instance, while the Company Secretary/Chief Compliance Officer of Oando Plc, Ms. Ayotola Jagun, during the panel discussions, said that Nigerian businesses that performed well should be rewarded and given incentives like preferred supplier status, Vice-Chancellor of Pan-Atlantic University, Prof Juan Elegido, said such approach only reinforces the love for incentives and not necessarily the love for integrity.

    The Managing Director of Siemens Nigeria, Mr. Michael Lakota, said  organisations must be able to reinvent themselves. He said Siemens corporation has adopted  sound corporate governance practices. He said such practices have been recognised, as Siemens came first for the fourth year running on the Dow Jones Sustainability Index.

    But can firms in Nigeria imbibe the culture of integrity in business and leverage the country’s abundant human resources and natural endowment to play a dominant in the global economic arena? Ms Oteh says “yes.”

    Her recommendation: “Regulation and adequate enforcement are proven ways to make people to do the right thing. In addition, we need an overhaul of the justice system because an assurance of speedy justice goes a long way in instilling discipline. I also strongly believe we need a vibrant civil society that is willing to ask the tough questions and hold the feet of politicians and institutions to the fire. We equally need strong social and religious institutions to bring in more clarity on the sometimes vague issue of integrity.”

    She also suggested that there is need to focus on the family and go back to the homes from where a person’s character is molded.

    “My personal story validates the importance of an early foundation. If today I am considered as a principled and disciplined person because of my stance for what is right and proper no matter the costs, I attribute this reputation to the early foundation laid by my parents,” she said, adding that focusing on molding the character of young people is certainly a powerful investment for the future that will help Nigeria tackle present day challenges of social cohesion, insecurity and inclusive growth. It will be a game changer capable of reversing the reputational deficit our country suffers from.”

    Organised by Convention on Business Integrity (CBi), a company limited by guarantee, the lecture was attended by industry leaders/operators, regulators, and the academia. Soji Apampa, Executive director of CBi, explained that it was named after Kolade because he exemplified business integrity as practiced throughout his distinguished career in the private and public sectors. He said the outcomes for this year will provide a springboard for the discourse for the third instalment next year.

  • 20 companies to form new Stock Exchange’s premium board

    The Nigerian Stock Exchange (NSE) may pick 20 companies out of the 30 stocks that made up its NSE 30 Index to form its new premium board. The NSE 30 Index tracks the 30 most capitalised stocks at the stock market.

    The Nation‘s investigation indicated that the NSE may soon launch the new premium board, which will effectively make the Exchange a three-tier trading platform. The new premium board is designed as a market for the most capitalised stocks with the best corporate governance and liquidity. It is meant to showcase Nigeria’s best stocks to the global market.

    The proposed premium board will be NSE’s exclusive board with its listing rules and criteria. The existing listing boards, the main board and the Alternative Securities Market (ASeM), will also continue to run concurrently with the new premium board. The existing listing rules will continue to apply to companies currently on the main board and ASeM.

    Investigation showed that some 20 companies may make the inaugural list for the new premium board, which will subsequently be used by the NSE to woo major companies in Nigeria’s premium sectors of oil and gas, telecommunications and manufacturing.

    Companies that will be regrouped into the new premium board, according to a preview of the criteria obtained by The Nation, will be taken from five sectors of the NSE. These included leading breweries, cement-manufacturers, leading fast moving and consumer goods companies (FCMGs), oil and gas companies and banks. However, the new board will still be dominated by banks which are expected to have the largest representation and as well as liquidity.

    None of the stocks in the populous insurance sector and other sectors such as agriculture, healthcare, construction and information and communication technology will make the maiden trading list for the board.

    The existing quoted companies that will make the new premium board, according to a preview, included the two leading cement companies- Dangote Cement and Lafarge Africa, the two leading breweries-Nigerian Breweries and Guinness Nigeria, at least seven banks including Guaranty Trust Bank, Zenith Bank, FBN Holdings, Ecobank Transnational Incorporated (ETI), Stanbic IBTC Holdings, United Bank for Africa (UBA) and Access Bank as well as at least three oil and gas stocks including Oando, Forte Oil and newly listed Seplat Petroleum Development Company.

    Other companies that will make the list included Nestle Nigeria, Unilever Nigeria, Transnational Corporation of Nigeria and Flour Mills of Nigeria.

    A source in the know of the undercurrents at the Exchange indicated that the transition of companies across the three boards will be a continuous exercise as companies that meet the criteria for the premium board will be upgraded to the board while any company on the premium board that falls below the minimum standards will be downgraded to the appropriate lower board.

    The NSE will also continue to undertake primary listing of new companies on the three boards, depending on the qualifying criteria and status of the company.

    A preview of the criteria for the new board obtained by The Nation had indicated that companies to be listed on the new board must have market capitalisation of not less than $1 billion or about N157 billion.

    The companies must also score at least 70 per cent on the Exchange and the Convention for Business Integrity’s Corporate Governance Rating System (CGRS).

    Besides, the companies must have a minimum free float of 20 per cent or value of shares floated must be equal to or above $1 billion and the number of shares representing its issued share capital must be equal to or above 10 billion units.

    The companies are expected to meet stringent corporate governance, capitalisation and liquidity conditions.

    According to the draft rules for the new board currently under consideration, to remain on the premium board, an issuer’s continued eligibility shall be evaluated by the Exchange annually in line with all the outlined criteria or on the basis of additional requirements which may from time to time be prescribed by the Exchange, provided that each company shall comply with all other continuing listing obligations as specified under the listings rules of the Exchange.

    The council of the NSE may also in its discretion grant an extension of time for a company to comply with the relevant free float requirements set out in these rules; provided that the company submits a formal and substantiated request in that regard setting out the reasons why it could not meet the said requirements and how it proposes to satisfy the requirements within the time granted.

    Also, in the event of non-compliance with any applicable codes or regulations affecting their governance, companies shall be expected without prompting, to disclose in the Directors’ report of their annual report why they are in breach.

    The Exchange had indicated that the new board is aimed at providing a platform for greater global visibility for eligible Nigerian entities, which will make it easier for them to attract global capital flows and reduce the cost of borrowing.

    Head, legal and regulation, Nigerian Stock Exchange (NSE), Tinuade Awe, said the new board would subsist on a very strict regime with a great deal of emphasis placed on the need to comply with good corporate governance.

    According to her, the companies on the new board would be liable to sanctions in the event of breach of the premium board rules as well as the listings rules of the Exchange.

     

  • Companies rush to beat delisting deadline

    Companies rush to beat delisting deadline

    Directors and key management officials of various quoted companies that were issued three-month notice of compulsory delisting from the Nigerian Stock Exchange (NSE) have been making frantic efforts to clear the backlog of corporate governance issues and secure waivers from the Exchange as the deadline closes in.

    The NSE had in late June given a three-month notice of compulsory delisting to 18 firms for various corporate governance and post-listing failures, especially non-release of financial reports and accounts for several years. The three-month notice expires next month.

    A reliable source at the NSE said the Exchange would follow through the process of compulsory delisting for those companies that fail to meet acceptable standards by the expiration of the notice.

    Many market and corporate source told The Nation that  various companies have reached out to the NSE to redress their corporate governance failures and seek for extended timeline to comply with some restructurings that require major changes.

    Investigation by The Nation  confirmed that the 18 companies were still listed on compulsory delisting, implying that none of the companies has been cleared by the NSE.

    The affected companies included Investment and Allied Insurance Plc, Goldlink Insurance, Afroil, Rokana Industry, IPWA, West African Glass Industry, Nigeria Wire and Cable, Starcomms, Daar Communication, Mtech, Big Treat, G.Cappa, FTN Cocoa Processing and UTC Nigeria.

    Others included Stockvis, Nigeria Sewing Machine, Jos International Breweries, Capital Oil and Golden Guinea.

    The NSE had indicated that while the five of the companies, including Stockvis, Nigeria Sewing Machine, Jos International Breweries, Capital Oil and Golden Guinea were penciled for delisting because they failed to regularise their listing status, other companies were being delisted because they have failed to submit requisite financial and operational statements.

    “The regulatory action is necessary to protect investing public from trading in the securities of entities with no current information regarding their financial status,” the NSE had stated.

    Reliable sources said the boards and key management staff of many of the affected companies as well as some influential shareholders have engaged the management of the Exchange on some of the underlining issues raised by the notice.

    According to sources, a few of the companies have made appreciable progress in resolving the concerns.

    One of the companies-FTN Cocoa Processing Plc has already released its two outstanding audited reports and accounts for the 2012 and 2013 business years.

    All the companies slated for delisting had been dormant and mostly at their nominal values. Companies such as Big Treat, Starcomms, Capital Oil and Afroil have been subjects of regulatory investigations.

    The Nation had earlier reported that the companies have been under intense pressure from shareholders, creditors and other stakeholders since the issuance of notice of delisting.

    Many shareholders were against the delisting of the companies, noting that delisting would worsen shareholders’ fate. However, shareholders who spoke to The Nation recently had called on the capital market regulators to probe the utilisation of the funds earlier raised by those companies and the previous projections made by the companies.

    Chairman, Ibadan Zone Shareholders Association (IBZA), Chief Sola Abodunrin, said the delisting of the companies could discourage investors from future participation in new issues as most of them only came to the market to raise funds without returns to shareholders.

    According to him, the companies did not follow through with their purposes of the fund raising and mismanaged investors’ funds.

    Abodunrin, a member of the board of trustees of the Investors Protection Fund (IPF) of the NSE, said delisting would be worse for the investors in the companies as they won’t be able to retrieve their investments.

    He said the companies would not adhere to any iota of corporate governance after delisting and shareholders would not have any hope of holding the companies to account.

    National coordinator, Independent Shareholders Association of Nigeria (ISAN), Sir Sunny Nwosu, also said the NSE and Securities and Exchange Commission (SEC) should go beyond the delisting to determine the extent of management’s culpability in the companies’ misfortunes.

    Another shareholders’ leader, Alhaji Gbadebo Olatokunbo, called for a thorough investigation of the management of the companies.

    According to him, the regulators should extricate failures that were due to environmental constraints from those due to managerial failures.

    Also, NSE’s Head, Legal and Regulation Division, Tinuade Awe, confirmed to The Nation that the Exchange has got overtures from some of the companies.