The Nation Newspaper

Tag: equity funds

  • Flour Mills to raise N40b equity funds in three years

    Flour Mills of Nigeria (FMN) Plc has registered a shelf fund raising programme with the Securities and Exchange Commission (SEC). It will allow the leading flour-milling company to raise up to N40 billion in equity funds over the next three years.

    Flour Mills of Nigeria (FMN) Plc Chairman, John Coumantaros, who confirmed the approval of the fund raising by the apex capital market regulator, said the board of directors had decided to raise the new equity funds in tranches.

    Flour Mills plans to raise the new equity funds through a rights issue, which will proportionately allot shares to shareholders on the basis of their shareholdings as at a pre-determined date. Shareholders had at an extraordinary general meeting in 2015 authorised the directors to raise up to N40billion of additional equity funds a rights issue.

    Coumantaros said the board of directors would watch the capital market condition to determine the appropriate time to launch the first tranche of the new supplementary issue.

    “We will continue to assess the economic climate to determine the most appropriate time to launch the first tranche,”Coumantaros said.

    Reviewing the operations and outlook of the group, Coumantaros noted that though the operating environment has been tough and challenging, the group can look to the future with confidence that its prospects are promising and bright while the fundamentals are strong.

    According to him, the group sees opportunities in the challenges and it is determined to explore them in the most profitable but sustainable manner.

    “FMN is determined to continue to feed the nation every day. We shall keep maintaining our wide portfolio of high quality consumer food options and step up our input of locally sourced raw materials thereby supporting the livelihood of Nigerian farmers and Nigerian businesses,” Coumantaros said.

    He added that the group would continue to invest in growing portfolio of localised products in support of the nation’s economy.

    He outlined that as the group strives to further restructure its operations, streamline business operations to focus on core businesses, monitor and manage costs optimally, improve and re-engineer existing product range, the group will focus on innovation and develop new strategies for the market by making its products more visible and available at points of sale.

    “We shall also continue to improve our sales, merchandising, redistribution personnel and activities,” Coumantaros said.

    He reiterated the support of the group for the Federal Government’s backward integration policy, assuring that the group is determined to ensure that its agro-allied strategy provides sustainable returns on capital invested by maximising local content in group products.

    He noted that in furtherance of the group’s vision to be involved at all stages of food value chain- from the farm to table, raw materials are being produced locally to ensure that good quality but fair value products are developed locally through the food supply chain to final consumer consumption.

    “By our policy of aggregating grains and local farm products, we are creating jobs and boosting rural economy. We are determined to continue to ensure that our investments and processes aside from ensuring value for shareholders and other stakeholders continue to enrich the lives of our consumers, farmers, suppliers and other relevant stakeholders,” Coumantaros said.

    He pointed out that by investing in the nation’s agricultural food-chain, the group was safeguarding its future and ensuring the sustainability of its businesses, noting that the backward integration programme is the most viable and sustainable thing to do.

  • CDCSL to launch private equity funds for real estate

    Converged Dynamics Capital Services Limited (CDCSL), a financial services company licensed by the Securities & Exchange Commission (SEC), has started the process of initiating a private equity fund for investments in the Nigerian real estate sector.

    Managing Director, Converged Dynamics Capital Services Limited (CDCSL), Mr. Abiodun Akinniranye, who said this over the weekend, said the company has engaged both foreign and local partners towards the launching of a robust private equity-based fund for Nigerian real estate investment.

    He said the fund, currently under structuring, would serve the dual purpose of accelerating the growth of the Nigerian real estate sector and bridging the country’s housing deficit while simultaneously providing return-minded investors with a gilt-edge instrument to invest their funds.

    According to him, with a huge housing deficit, which stands at roughly 17 million units, there is no way the government or regular banks could provide the required funding to bridge the supply gap.

    “Specialised investment vehicles like structured funds are the viable option for large scale projects in the sector. There are funds out there for the Nigeria market, forget the notion that the international investment community is averse to investing in Nigeria or that our current foreign exchange liquidity challenges are scaring them off. These challenges will reduce and then stabilise.  These funds are long-term instruments with investors looking at exit horizons of seven years and above. They realised that Nigeria continues to be a compelling story and the long-term assessment is that we are a viable investment destination,” Akinniranye said.

    He pointed out that one of the main challenges for the attraction of investments to Nigeria is the lack of appropriately structured financial instruments as investors are interested in the structure of the fund, quality of its investment committee, the service providers and the experience of the fund managers among other details.

    He said CDCSL has the expertise, experience and network to structure appropriate private equity funds for the real estate sector, assuring that the fund will be structured in line with the global best practices and regulatory framework of SEC.

    He added that CDCSL’s structured finance department focuses on raising funds for viable projects through specialized instruments tailored specifically to the dynamics of the project.

    Akinniranye reiterated the commitment of CDCSL to creating various investment funds of different strategies   for the Nigerian financial market with a view to enhancing the capital formation necessary for development of major national priorities such as housing, hospitality, health and power among other general sectoral challenges.

  • Livestock Feeds to raise N1.1b new equity funds from shareholders

    Livestock Feeds Plc has received the approval of the Nigerian Stock Exchange (NSE) to raise about N1.1 billion new equity funds from existing shareholders. The proposed supplementary issue of the agro-allied company was approved by the quotation committee of the Exchange last Thursday.

    A regulatory document obtained at the weekend by The Nation indicated that Livestock Feeds plans to undertake a rights issue of 1.0 billion ordinary shares of 50 kobo each at a price of N1.10 per share. The rights issue will be pre-allotted on the basis of one new ordinary share for two ordinary shares already held by the shareholder.

    The rights issue’s price of N1.10 per share represents about 28 per cent increase on the current market value of 86 kobo at the Exchange, raising fears about the attractiveness of the rights issue to the retail shareholders.

    More than half of the rights issue’s funds are expected to be provided by UACN of Nigeria (UACN), which acquired majority equity stake in the agro-allied company in 2013. Recent shareholding analysis showed that UACN holds 51.01 per cent equity stake in Livestock Feeds while First Capital Trust Limited holds the second largest equity stake of 8.02 per cent. Cashcraft Asset Management Limited holds the third largest stake of 5.06 per cent. Sundry minority shareholders hold the balance of 35.9 per cent equity stake.

    Market pundits, however, said the rights issue may provide a window for UACN to restructure the share capital of Livestock Feeds to allow for injection of additional funds and technical competence into the operations of the company.

    Chairman, UAC of Nigeria (UACN) Plc, Mr. Dan Agbor, had told shareholders at the annual general meeting in June that the group decided to retain the larger part of its net earnings in 2015 to ensure that it remained in a position to participate in new equity issues that might be launched by its subsidiaries.

    According to him, the board had recommended total dividend of N1.92 billion for the 2015 business year while being mindful of the need to conserve funds so that the group could participate in the rights issues to be undertaken by three of its subsidiaries, including UACN Property Development Company Plc, Livestock Feeds Plc and Portland Paints & Products Nigeria Plc.

    Incorporated as a limited liability company in March 1963, Livestock Feeds converted to a public limited liability company and was quoted on the Nigerian Stock Exchange (NSE) in 1978.

  • Africa woos private equity funds

    From milk churning in Zimbabwe to rose growing in Ethiopia, private equity investments in Africa have returned to pre-crisis levels and should keep rising as funds seek bumper returns in far-flung markets.

    Private equity deals in Africa totalled $8.1 billion last year, the second highest on record after the $8.3 billion posted in 2007, according to the African Private Equity and Venture Capital Association (AVCA).

    This year could be even bigger as investors tired of low returns in developed markets look to cash in on the rapidly emerging middle-class consumers in Africa – home to many of the fastest growing economies in the world.

    Private equity deals in Africa between 2007 and 2013 earned 60 percent more than the MSCI emerging market index, AVCA says.

    Traditionally private equity buyouts in Africa have been supported by development organisations but there are signs over the last year that global funds are taking more aggressive steps to tap into a continent of 1 billion people.

    “The growth story in Africa is compelling,” said John van Wyk, head of Africa at Actis, an emerging-market focused fund with around $4.6 billion under management.

    “Global funds are realising they need to have some sort of Africa strategy and that hasn’t always been the case.”

    Large U.S. private equity firms, including TPG and Kohlberg Kravis Roberts (KKR), have made their first investments in Africa over the last year.

    The New York State Common Retirement Fund, one of the largest U.S. pension funds and worth around $180 billion, said in April it could invest up to $5 billion in Africa over the next five years to boost returns and diversify its portfolio.

    TPG said in June it would invest up to $1 billion in African companies under a tie-up with Sudanese billionaire Mo Ibrahim’s Satya Capital, which has interests ranging from healthcare in Nigeria to manufacturing in Tanzania.

    Investments are focused on fast-moving consumer goods, financial services, healthcare and telecommunications. Bigger funds are looking at infrastructure projects, including filling massive unmet electricity demand across Africa.

  • Why we need N40b new equity funds, by Flour Mills

    Flour Mills of Nigeria Plc plans to use the net proceeds of its impending N40 billion rights issue to bolster its working capital and restructure its leveraged balance sheet to avoid long drain of financial mismatch.

    Shareholders of Flour Mills, Nigeria’s most capitalised and largest flour-milling company, met last week at an extraordinary general meeting and approved increase in the authorised share capital of the company and a proposal to raise about N40 billion new equity funds from its shareholders.

    Shareholders approved increase in authorised share capital of the company from N2 billion to N2.5 billion through the creation of additional 1.0 billion ordinary shares of 50 kobo each. Besides approving the N40 billion rights issue, the meeting also granted a waiver to the board that in the event of under-subscription, the board can allocate unsubscribed rights’ shares to interested investors.

    The meeting mandated the board of directors to use net proceeds of the rights issue to meet the funding requirements of the company.

    Chairman, Flour Mills of Nigeria, Mr. John Coumantaros, highlighted the need for the new equity funds, urging shareholders to support the quest to further capitalise the company.

    According to him, the net proceeds would be used to reduce the company’s debt burden and resultant interest charges as well as to increase working capital to support recent investments.

    He noted that with the additional capital, the company would be in a stronger position to pursue high growth business opportunities without the risk of high financial leverage or mismatch.

    “You will recall that during the last five years, Flour Mills had embarked on a major expansion programme in our core food, agro allied, logistics and support businesses. We also undertook strategic acquisitions and mergers. These were aimed at strengthening, consolidating, re-focusing and supporting our core food business,” Coumantaros said.

    He said the company would be using the net proceeds to also cushion the adverse effect of the sudden slump in global crude oil prices, which has resulted in major devaluation of the naira and caused increases in import costs and financial charges.

    He said the company would be making “a very big investment programme” to improve its local manufacturing capacity noting that the foreign exchange market has increasingly become tough.

    He outlined some of the recent investments by the company to include the inauguration of a new sugar refinery at Apapa; the development of a 10,000-hectare sugar estate and mill in Sunti, Niger State; and an ultra-modern pasta factory at Agbara, Ogun State, among others.

    According to him, most of these projects are now operational and making steady and impressive progress.

    He expressed optimism that these investments would deliver good returns, positive cash flow and continue to make appreciable contributions to the group’s earnings and profit in the years ahead.

    In 2014, Flour Mills had distributed N5.01 billion as cash dividends on the basis of N2.10 per each ordinary share. Also, a total of 238.6 million ordinary shares of 50 kobo each were also distributed to shareholders through a bonus of one for 10 shares.

    Key extracts of the audited report and accounts of Flour Mills for the year ended March 31, 2014 showed that turnover rose from N301.94 billion to N332.14 billion. Profit after tax however dropped from N7.54 billion in 2013 to N5.37 billion.

    Flour Mills had recently embarked on group restructuring, strategic business acquisitions and investment in its core food business and backward integration programmes. It commissioned a 750,000 metric tons per annual sugar refinery built at a cost of $250 million in April 2013.

    It has also continued to strategically invest in large scale commercial farming to support its food processing units with locally produced raw materials. The group had invested about N41 billion in capital projects in recent period including key projects such as flour capacity expansion in its Apapa mills, completion of Golden Snacks facility in Agbara, completion of Golden Sugar Refinery, establishment of new flour mill in Calabar, expansion of pasta & noodles lines and many major agro allied projects such as investments in Sunti Golden Sugar Estates and new animal feed mill and acquisition and development of large scale commercial farming.

  • May & Baker to raise new equity funds

    •Shareholders laud dividend payment

    May &Baker Nigeria Plc plans to raise new equity funds in the second half as the healthcare company rebounded with a profit before tax of N101.1 million in 2014.

    Chairman, May & Baker Nigeria Plc, Lt. General Theophilus Danjuma (rtd), said the company would raise new equity funds later this year to deleverage its balance sheet and consolidate the gains of its recent investments and profitability.

    Danjuma indicated that the company may opt for rights issue to compensate shareholders that had bore the burden of the company’s huge depreciation and interest financing, which depressed profit in the previous year.

    Shareholders had earlier in 2014 approved a resolution authorizing the board of the company to raise additional N3.2 billion through rights issue or private placements.

    Danjuma said the new equity issue was delayed to give investors opportunity to pick their rights in recognition of their supports for the company.

    “The company has not been able to consummate this offer on account of due considerations of timing and the readiness of our members to fully pay for their stakes. We are mindful of the sacrifices members have made in the past when the company was under pressure of constructing the plant in Ota and we realise that it will only be fair to open the offer when majority of us will be able to take our rights,” Danjuma said.

    He called on the shareholders to prepare to take up their Rights in the current financial year to enable the company raise more equity for its operations.

    Key extracts of the audited report and accounts for the year ended December 31, 2014 showed that the company’s profit before tax rose by 818 per cent from N11.4 million in 2013 to N101.1 million in 2014. Profit after tax stood at N63 million in 2014 as against net loss of N103 million in 2013. Turnover rose to N7 billion in 2014 as against N6.3 billion in 2013, representing a growth of 11 per cent.

    Danjuma, at the annual general meeting in Lagos, said the performance in 2014 reflected the gains of cost containment measures and efficient allocation of resources by the management, which drastically reduced the level of money paid by the company to service debt obligations.

    He however noted that the company continued to suffer high finance charges resulting from its dependence on bank and related loans, a trend the pharmaceutical giant has had to live with for several years now since it undertook the construction of its new pharmaceutical manufacturing  facility in Ota, Ogun State.

    He pointed out that the company paid a total of N600 million on finance charges in 2014, a 4.2 per cent reduction from the figure of N630 million paid for similar charges in 2013 noting that the huge interest expense could have added to the profit of the company and subsequently the dividends paid to shareholders if it was trading with its own funds.

    “I am optimistic that as soon as soon as we are able to recapitalise the business we shall take down the high financing cost which is currently taking substantial earnings off the company. This will put us in a stronger position to fully leverage our installed capacity, aggressively promote our existing brands, launch the new products and businesses in our pipeline and deliver better profits,” Danjuma said.

    Managing Director, May & Baker Nigeria, Mr. Nnamdi Okafor said steady progress is being made by the company in the areas product formulation, development and marketing.

    He said recent strategic efforts have helped to grow the business of the company in the last three years with consistent improvements in turnover.

    According to him, despite increasing challenges in the economy, the company’s has steadily improved on its profitability as gross margins have consistently improved in the last three years

    He outlined other recent milestones by the company to include the certification of its pharmaceutical manufacturing facility by the World Health Organisation(WHO) on Good Manufacturing Practice (GMP), poting out that this achievement has opened the doors of the company to international business enquiries which will soon translate into huge revenue and profits.

    He noted that the recent celebration of 70 years of doing business in Nigeria by May & Baker is also creating additional confidence in stakeholders who see the pharmaceutical giant as a viable and sustainable business organisation.

    Shareholders of the company commended the return to profitability and the resumption of dividend payment. They unanimously approved the payment of a dividend per share of 5.0 kobo for the 2014 business year.

    President, Progressive Shareholders Association of Nigeria (PSAN), Mr. Bonifae Okezie, shareholders were that the company has returned to profit noting that with the modest dividend payment for the 2014 business year, the expectation is that it would improve to higher dividend in the years ahead.

    “Let me thank the board and management for a job well down. Though, the dividend of 5.0 kobo is small but if we look at where we were coming and the gigantic project that the company just completed, then we need to appreciate the management of the company. We hope that this will improve in the current financial year,” Okezie said.

    It will be recalled that the company got under pressure from financing charges and depreciation allowances as a result of its new  pharmaceutical manufacturing plant, which was financed largely by loans during the 2008-2009 capital market recession. Finance costs rose by 34.3 per cent to N630.71 million in 2013 compared with N469.63 million in 2012, while the company provided about N240 million annually in 2013  and 2014 out of its gross profit for the depreciation of the new pharmaceutical  facility with monthly depreciation average of N19.8 million. The year 2014 was the first full year of depreciation.

    May & Baker had raised her capacity to produce more products with the construction of the world class pharmaceutical centre known as the PharmaCentre located in Ota Ogun State. The facility has raised May & Baker’s production capacity by over 60 per cent. The PharmaCentre  is a mega investment in the pharmaceutical sector targeted at making Nigeria one of the leading producers of quality medicines in the world. It is one of the few Nigerian pharmaceutical facilities that were recently certified by the World Health Organisation (WHO) on Good Manufacturing Practice (GMP). The PharmaCentre is currently undergoing the process of WHO pre-qualification for its specific products.