Corporate news summary 5/11/2018
1. Corporate news summary 5/11/2018, an interesting piece of good news was revealed over the weekend. The FG has now listed E-Commerce Services, Book Publishing, Software Development and Publishing, Motion Picture, Video and TV Programming Production and Distribution, and Music Production, Publishing and Distribution to its list of industries eligible for Pioneer Status.
According to an excerpt of the gazette cited, those in these industries can get up to 3 years of Pioneer Status, meaning they don’t get to pay tax on products that fall under this. For E-commerce companies, the products are “E-commerce services with sales done predominantly or exclusively online.” Thus, if you run an online and offline merchant sales business, you only get pioneer status for the online bit.
This means that those who sell merchandise on Instagram can apply for pioneer status. Also, for software developers, the products are “operating systems, software applications and computer games.
”To be considered, you will have to apply in the first year of production/service and must apply for an extension no later than one month after the expiration of the initial tax relief period of three years, or an extension of one year.
”This means you can’t apply for Pioneer Status for a product that has already been sold for over a year. You are also expected to have “a non-current tangible asset of over one hundred million naira (N100 million).”
This suggests that your company has to be worth more than this. To apply, make sure you have a SWOT, Project Overview, Financial Projection, etc.
Corporate news summary 5/11/2018
2. Despite the recent regulatory headwinds faced by MTN in recent months, the telecoms giant reported strings of strong performances from Nigeria. In its third quarter results, MTN reported a 1.1% rise in its user base to 225.4 million, adding 2.5 million subscribers.
MTN Nigeria has a subscriber base of 56 million, the single highest of any country. MTN Nigeria also had an excellent quarter, increasing service revenue by 17.4% year on year, towards the upper end of its medium-term target for Nigeria of double-digit growth.
This growth was led by a 52.5% increase in data revenue and a 21.5% increase in outgoing voice revenue. MTN Nigeria reported 17.2 million active data subscribers, up 15.1% quarter on quarter, and 2.5 million Mobile Money customers, up 12.4% quarter on quarter.
MTN also reported an incredible EBITDA margin of 43.2% in the first 9 months of 2018, up from 4.7% a year earlier. ARPU in Nigeria stands at $4.12 compared to SA at $7.06.
The only negative headwinds in its Nigerian operations is the fact that digital revenues from VAS is declining and likely to continue to decline. It fell by 28.5% this quarter, as MTN stopped automatic renewal subscriptions of VAS (text messaging ads).
If you are in this space, then you have effectively been placed on notice. MTN also reported that the surge in data revenue was supported by an increase in active data subscribers, as well as more smartphones on its network. They should go and thank the influx of cheap smartphones. Read more
3. Dangote Flour mills claimed during the week that it has broken the Guinness Book of Records for the World’s Largest Puff-Puff pyramid. The flour miller had fried two metric tonnes of flour to celebrate the 2018 World Puff-Puff Day on Saturday, October 27, 2018.
Unfortunately, the last thing on the mind of investors in Dangote Flour Mills is not even puff-puff. The company released its 2018 nine months results showing that revenues dipped a massive 16.93% year on year, while profits dropped by 75%.
The company recorded a massive decline in flour business, dropping to N72b in 2018 versus N86b in 2017.
Its spaghetti and pasta business also recorded massive declines with revenue, going from N13b in 2017 to N10.8b in 2018.
4. Still, on Dangote Group, its sugar business, Dangote Sugar recorded revenues of N116.7b, down 28.3%. Profit was N16.7b, down 36.9% year on year for the first 9 months of the year.
The company also reported that refinery sales volume was down 13%. According to Dangote Sugar’s COO, Mr. Ravindra Singh Singhvi, “Production and sales during the period under review were greatly impacted by logistic challenges caused by the Apapa traffic gridlock.
This constrained the number of trucks required on a daily basis to evacuate the production volumes. The influx of unlicensed sugar, smuggled into the markets nationwide continues to exert a downward pressure on selling prices.
The impact of smuggled sugar has taken up about 40% of the market, despite efforts being deployed by regulators to stem the tide.” So basically, the company’s performance has been largely affected by the Apapa traffic gridlock, smuggling and a crash in sugar prices.
No business wants to be in this kind of situation. He further reassured investors that they “are employing measures to mitigate the gridlock and the establishment of new markets to improve sales.”
Corporate news summary 5/11/2018
5. On the Apapa road that Dangote Group and Flour Mills of Nigeria are constructing, the Group Managing Director of Flour Mills of Nigeria Plc, Paul Gbededo, told Nairametrics at the sidelines of the NESG two weeks back that the road would be completed by end of October.
However, he noted that “completing the road without fixing the bridge will still affect logistics in Apapa, so we are looking at the Federal Government completion of repairs on the Apapa bridge and that will ease the pressure on Apapa greatly. We are hopeful that by next year, things will better with logistics in that area.”
6. We also asked the CEO of Flour Mills why they were looking to go into the power generation business. According to him, “We operate in Apapa, we have the capacity to generate 60mw of electricity.
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Of this, we only need 50% and as such, we have a redundancy of 50% which we can supply to our neighbours. That is why we applied for electricity license to enable us to generate and distribute to our neighbours.
With that, we will be able to improve the economy of the company and bottom-line.” The challenges of stranded power, especially for mega corporations, is not just restricted to Flour Mills alone.
For most of them, they invested billions in power plants that generate power in excess of what they actually need. Unfortunately, the fixed cost will continue to be incurred until they find other means of selling the excess power.
Making this worse is the disjointed nature of our power sector regulations, which makes it very difficult for those with captive power to switch to embedded power or sell directly to the grid.
The existing tariff regime is a disincentive for any major off takers. That excess 50% can probably power the whole of Festac. By the way, Flour Mills also reported a decline in its revenues which dropped to N269.7 billion in the first 6 months ending September 2018, from N298 billion same period last year.
7. Meanwhile, just as Flour Mills struggles, the likes of Nestle are reporting strong growth in revenues and profits. Nestle reported that its revenue for the period ended September 2018, increased from N185 billion in 2017 to N203 billion in 2018. This represents a 9.72% increase year on year.
Profit before tax jumped from N34.4 billion in 2017 to N48 billion in 2018. This represents a 39.5% increase year on year.
Profit after tax also surged from N22.9 billion in 2017 to N33.1 billion in 2018. This represents a 44.5% increase year on year. Nestle’s food revenue was a massive N129 billion, up from N117 billion a year earlier, while its beverage segment posted a revenue of N74 billion, up from N67.9 billion.
Nestle’s food business includes the production and sale of Maggi, Cerelac, Nutrend, Nan, Lactogen and Golden Morn, while its beverage business includes the production and sale of Milo, Chocomilo, Nido, Nescafe and Nestlé Pure Life. These are just incredible brands that have remained dominant for decades. What you call a moat.
8. Talking about food and beverage, the Food, Beverage & Tobacco Senior Staff Association (FOBTOB) complained bitterly about the increased rate of retrenchment of workers by employers in the sector.
According to the National President of FOBTOB, Quadri Olaleye, “We have discussed with the government that instead of what we call the capital allowance, labour intensive allowance should be introduced.
The government should be able to engage companies and our employers’ association in discussions to look at the capacity of the industry and look at the number of workers that should be in that industry to move the food sector forward.
Government giving some percentages as a capital allowance to companies that use sophisticated machines is totally against the situation of the economy.” This is a rather bizarre but interesting proposition.
Typically, the government gives companies capital allowances by allowing them to deduct the cost of investing in fixed assets from their taxes on a prorated basis.
He is now suggesting this should be replaced with “labour intensive allowance” forgetting that labour costs is an allowable expense deductible for tax purposes.
9. While they jostle for more jobs, a recent report by the Top Employers Institute (TEI) certified British American Tobacco (BAT) as one of the best companies to work for in Africa.
How did they arrive at this? Well, the report claims the criteria were talent strategy, learning and development, leadership development, performance management, career and succession management, among others.
10. We reported last week that May & Baker is currently in the market looking to raise about N2.455 billion in a rights issue. The company has hit the road marketing the rights issue and gone as far counterintuitively promising investors dividends.
The company also claimed that some proceeds from its rights issue would be used to build a plant that will be dedicated to the production of Paracetamol, an analgesic.
Why? It says that it can’t meet the demand for paracetamol. According to CEO of the company, Nnamdi Okafor, “Over N400 million of the expected N2.45 billion will be used to finance part of our equity in Biovaccines Nigeria Limited, the joint venture company for local vaccine production.
We are also going to invest over N500 million on capacity expansion for one of our cash cow products, paracetamol, for which we are building a dedicated plant. Marketing and brand building is expected to take over N500 million.
About N400 million will be used to offset part of its current loan portfolio of about N950 million, while the remaining will be used to buy working capital.” Its pharmaceutical division makes up about N7.9 billion out of the N9.3 billion revenues.
The eastern part of Nigeria accounts for about N3.7 billion of revenues, while Lagos alone accounts for N3 billion.
Corporate news summary 5/11/2018
11. During the week, reports emanated that the Brazilian state-owned energy company, Petrobras, will most likely announce the sale of its stake in Petrobras Africa to Vitol.
Petrobras’ other venture partners in Petrobras Africa — UK’s Helios Investment Partners and Brazil’s Banco BTG Pactual — have both chosen not to sell their stakes in the business, the sources said.
Recall we reported earlier in the year that, Petrobras had decided to divest as much as $21 billion worth of assets. The decision was made following a dramatic increase in the company’s debt to the tune of $100 billion.
So far, Petrobras has reached an agreement to sell a $2.9 billion worth of assets to Equinor AXA, a Norwegian company. The company is also contemplating selling off its natural gas pipeline which is 4,500 kilometres long, and valued at $9 billion. More on this story.
12. Lekki Gardens made the news last week after a cross-section of owners at Horizon Premier-1 Estate in Lekki dragged Lekki Gardens Estate Limited, and Managing Director of the company, Richard Nyong, to a Lagos High Court.
They claimed that Lekki Gardens had sold units at the estate in 2015 with a pledge to deliver in 2016, which did not happen up until the time of filing the suit in 2018.
The claimants also noted that rather than apologise for the delay and make adequate compensation for loss of rent revenue to subscribers, the developer decided to convert the space for a children’s playground, green area and recreation facilities to shops under the guise of providing facility offices.
They also accused Mr. Nyong of setting up new property development companies to advance his business and avoid the disgrace which the 2016 collapsed building incident brought to the Lekki Gardens brand and to shield the company from liabilities. What is wrong with setting up new entities biko?
13. Arik Air denied knowledge of a data leak during the week after a twitter user reported that customer data belonging to Arik Air may have leaked.
He said the data was found during his normal course of scanning for open/exposed/vulnerable Amazon S3 buckets. The user said that he first noticed the leak on the 6th of September, 2018 and notified the airline same day.
The carrier finally replied on the 17th of September 2018, of which he was asked to resend an email to another email address provided.
Arik Air spokesperson, Ola Adebanji, said “Our online platforms are up and running and not under attack.” On whether Arik Air uses Amazon S3 buckets, he said, “I don’t think so.”
14. We learnt during the week that Nigerians who use Remita to make payments into the Treasury Single Account (TSA) of the Federal Government would have to bear the costs associated with using the platform.
Remita explained that this was based on a directive from the government for an immediate implementation of the global e-payment pricing system whereby people making payments bear the costs for the service rendered.
The Remita statement read as follows: “This implies that the payer will, henceforth, bear the cost of using the platform and associated charges for the transaction rather than the Government bearing the cost of the transaction as was the case before now.
You will, therefore, notice that service fees will henceforth be added to all your transactions.” Who does this affect? Anyone paying bills such as taxes, custom duties, registration fees, tuition fees, etc. to the government will be affected.
Corporate news summary 5/11/2018
15. Asset & Resource Management (ARM), Nigeria’s leading asset management and investment firm announced the successful exit from Oceanwinds Hospitality Limited (OHL), owner of Four Points By Sheraton Lagos Hotel in Oniru, Victoria Island Extension, Lagos.
ARM sold its stake in the hospitality company to Westmont International Development Inc., a Canadian based investment firm.
ARM seems to have had a successful streak in the hospitality sector, having invested in Moorhouse Sofitel Hotel in Ikoyi, Lagos (now Hotel Moorhouse M Gallery by Sofitel), which it exited in 2004, and the Oluwole Urban Mall, Lagos, exited in 2012. No report on how much this deal cost.
16. During the week, the CBN confirmed that the minimum capital base forPayment Service Banks “PSB” operating in Nigeria will be N5 billion. The apex bank made this known in a circular to all stakeholders on the guidelines for licensing and regulation of the PSBs.
PSBs basically, facilitate high-volume low-value transactions in remittance services, micro-savings and withdrawal services in a secured technology-driven environment to further deepen financial inclusion.
They are only expected to operate in rural areas and should enter into partnerships with card scheme operators. They are also expected to roll out agent networks across their areas of operations.
N5 billion seems like a lot to me if the CBN actually wants an innovation-driven solution to financial inclusion. I understand that the PSBs are expected to accept deposits, carry out payments and remittances (including inbound cross-border personal remittances) services through various channels within Nigeria, sell forex from remittances, issue debit and prepaid cards in its name, render financial advisory service, etc.
They are however not expected to grant loans and advances. I expect some of the many Fintech Startups to fall into this category.
Interesting to note that Telcos, Postal Services, Retail Chains, Fintechs and Mobile Money operators are listed as “Eligible Promoters” in this scheme.
17. The Senior Vice President of Africa Finance Corporation, Investments,Begna Gebreyes, has announced that the financial agency is about to ink a $100 million (N36.5 billion) investment deal in Nigeria’s mining sector.
Gebreyes said that about half of the planned investment into the mining sector is coming by way of debt, equity, and off-take instruments. According to Gebreyes, “AFC is a very big supporter of the Nigerian mining sector from inception. We want to support the Nigerian mining sector from inception.
In the last four and half years, we have started making investments throughout the continent, and we’re actively seeking to make investments in Nigeria.”
18. Global banking giants, HSBC Bank and UBS Group have shut their offices in Nigeria. In a report released by the CBN, foreign investment into the country fell sharply to N379.84 billion ($1.2 billion) in the first half of the year from N532.63 billion ($1.7 billion) in same period last year.
Although the CBN did not give reasons for HSBC’s decision to close its office in Nigeria, this decision has been linked to the running battle with the Federal Government over its poor rating of the present administration’s economic policies.
HSBC had, in a report by its Global Research Unit, noted that another re-election of President Buhari next year will spell doom for the country’s economy. The presidency had also accused the bank of laundering more than $100 million for the late Gen.
Corporate news summary 5/11/2018, Sanni Abacha in Paris, London and Geneva. The presidency also accused the bank of laundering proceeds from corruption involving more than 50 other Nigerians.
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