The challenging state of the Nigerian economy has put a number of companies in quandary.
Foreign exchange crisis means most manufacturers scramble to get inputs from abroad, just as insecurity in some parts of the country plunges a number of corporate organisations into suboptimal operations.
Ashaka Cement plc. is one of the manufacturing companies hard hit by insecurity, resulting from insurgency in the north-eastern Nigeria. Insurgency has led to factory shut-downs, loss of revenue and profits as well as lower share valuations in the Nigerian Stock Exchange for Ashaka. In the last financial year, shareholders merely took home N15k dividend per share.
The operational hurdles, which impacted on the last quarter (Q4) of 2015 result continued in the first quarter (Q1) of 2015, cutting top-line by 21 per cent.
In fact, the SBG Securities, member of Standard Bank Group, did an analysis on Ashaka and recommended a SELL option for shareholders on limited upside of 2.6 per cent. This shows all is not well with the cement maker’s valuation.
In order to expand investment and operations in the company while boosting returns for shareholders, Lafarge Africa, which already owns 82.46 per cent of Ashaka, is offering minority investors of the Gombe State-based cement (who own 17.54 per cent shares) an opportunity to upgrade.
Lafarge Africa wants these shareholders to enjoy the benefits of being Ashaka and Lafarge Africa’s shareholders, such that they can become indirect shareholders of the cement firm.
According to Lafarge Africa, these minority shareholders stand to reap a number of dividends. First, there will be increased value for their investments. As at the time Ashaka declared 15 kobo per share, Lafarge Africa declared N3. Without doubt, the capacity of the two companies are poles apart, as Lafarge Africa has 8.5 million metric tonnes (MT) capacity and will soon hit 12 million MT, while Ashaka only has 1 million MT.
Second, Ashaka will have an increased capacity to borrow, as they can now get funds, using Lafarge Africa’s balance sheet.
More so, with the state of insecurity across the country, especially in the north-east, it makes investment sense to diversify and get more returns. The minority shareholders, who are lucky to upgrade to Lafarge Africa’s status, will enjoy the returns from Lafarge Africa, Wapco Operations and Ashaka.
Again, there is currently little liquidity in Ashaka shares, such that it is still difficult to sell them. The SBG Securities said Ashaka’s shares had lost c21 percent following an unimpressive Q4 15 result, adding that “from current levels, we do not see a meaningful catalyst supportive of a re-rating of Ashaka’s shares.” Lafarge believes this arrangement favours the minority shareholders and Ashaka in general.
“In this offer, you have 202 shares of Ashaka for 57 shares of Lafarge Africa,” Bruno Bayet, Head of strategy for Lafarge Africa Plc., told Real Sector Watch exclusively.
“This translates to 3.54 shares of Ashaka to one share of Lafarge Africa. If you multiply 3.54 by 15k (last dividend), you probably get nearer to 50k, whereas that share in Lafarge would have handed you N3. This offer gives you 24 per cent upside in the value of your investment,” Bayet said.
“This is the time for an Ashaka shareholder to move to Lafarge level. We are giving him additional N2:00 for doing so. So, if you own 2000 shares of Ashaka, you get an extra 4000,” he further said.
With this arrangement, the management of Ashaka remains the way it is. Ashaka will remain a legal entity and may no longer be listed on the stock exchange after some time.
A key reason for considering this option is that Lafarge Africa is expanding and has a bigger picture of what it wants to do in the nearest term in Nigeria.
Apart from expanding capacity, the firm is a reference point on energy efficiency, already using biomass, a form of renewable energy, in its Wapco factory, located at Ewekoro, Ogun State.
The building materials giant also needs consolidation to compete better and roll out various innovative programmes in its cupboard. The company stands to be more profitable in the nearest future, as it readies to introduce Road Cement and other innovative products.
Recently, Lafarge Africa acquired an additional 50 per cent stake in the United Cement Company of Nigeria (Unicem), having earlier acquired 35 per cent equity in the Cross River-based cement company.
At the conclusion of the transaction, Lafarge Africa will own an indirect interest of 100 per cent of the issued share capital of Unicem.
To a Lafarge Africa stakeholder, this shows ambition and the company’s confidence in the Nigerian economy.
“Lafarge shareholders will now be more confident that they are part of the whole process and we can support it with our balance sheet,” said Bayet.
Analysts at SBG Securities see this as a good deal for minority shareholders.
According to SBG Securities, “it appears to be a good deal. We doubt implied valuations will be realised any other way. Based on our analysis, we expect minority holders in Ashaka to accept this offer. On our estimate, implied valuation (N23.8/s) suggests FY16E Enterprise Value (EV)/ Earnings before interest, taxes, depreciation and amortization (EBITDA) of 16.6x and a P/E of 20.7x, which we don’t see as attainable in the medium term. Relative to the average multiples of Dangote Cement and Lafarge Africa, the implied valuation indicates a 70 per cent and 30 per cent premium on a FY16E EV/EBITDA and PE basis respectively,” SBG Securities said.
Augustine Ilodibe: Nine years after
How time flies. Nine years have just gone by. And it looks as if it was yesterday. Yes, on July 1, 2007, Chief (Dr.) Augustine Ejikeme Ilodibe of the Ekene Dili Chukwu passed on. Although he has gone, but his memory lingers. His legacies bear testimony to his giant strides beyond the shores of Nigeria. He was not only the star of his people, but also the hope of his generation. Nobody will forget that he put Nnewi in the global map.
The good story of the late Ilodibe started on December 18, 1932, when he was born at the home of the late David Ilodibe and the late Mrs. Eunice Ilodibe, in Otolo Nnewi, Anabra State. His father had named him Ejikeme. He was baptised with the name Augustine in the Catholic Church.
Though not born with the proverbial silver spoon, the late Ilodibe was able to put silver spoons in the mouths of numerous people. However, life was not a bed of roses for him throughout. Fate dealt him a blow in 1942, when his father and breadwinner of the family died. He was barely 10 years old, and it seemed as the whole world had collapsed on the family.
However, when his mother noticed that the young Augustine was a child of promise and an epitome of humility and hard work, she took him to the then Parish Priest of the then Roman Catholic Mission, Nnewi, Rev. Father Kettle in 1946. Before this time, Augustine had left for Aba to live with his cousin, the late Chief J. C. Ulasi, a transport magnate, who suddenly died in 1945. Young Augustine returned to Nnewi and
lived with Rev. Father Kettle until 1950, when he completed his primary education.
The Catholic priest was so impressed with Augustine’s character and therefore, gave him 35 pounds to support his ambition to be an automobile spare parts dealer. He had prayed for the young man’s success in whatever he did. Indeed, owing to his association with the reverend father, he was nicknamed “Nwa Father” (Rev. Father’s Child)” by his many admirers.
With the 50 pounds, he set into the world of business. When he relocated to Onitsha, where he underwent a period of apprenticeship in motor spare parts business under the late Mr. D. C. Chukwujekwu, an acknowledged master in the trade. On successful completion of his apprenticeship, he set up his first business venture – a modest motor spare parts shop in Onitsha. His industry and determination saw the business grew, hence in August 1955, he decided to into transportation. His dream began to actualised in August 1955, when he purchased his first lorry from SCOA Motors Ltd, Onitsha.
Initially, he operated his new transport business along side his motor spare parts venture. However, he was quick to realise that the road transport business demanded absolute devotion and concentration. He was, therefore, compelled to wind up the motor spare parts business to concentrate fully on road transport. As a result of the success he achieved with the first lorry, he purchased a second vehicle three months after.
Ilodibe had name his transport company “Ekene Dili Chukwu” (Thanks be to God). On the choice of name, he had said he had nothing else to say than to thank God and express gratitude to him for the unexpected achievement. Like a little acorn, the business that started with a lorry grew to become a cedar, and has a pie in every sector of the Nigerian economy, including, real estate, manufacturing, steel and farming.
Ilodibe was both a philanthropist and a humanitarian. He loved and served people. His humility and kindness were unparalleled. In fact, most of his philanthropic and humanitarian services were unknown to his immediate and larger family. He touched lives in many ways. For one, he established a scholarship fund in perpetuity from which many people have been trained and are still being trained. He constructed a postgraduate school building for the University of Nigeria (UNN). He also built a guest house for the UNN as well as the
Rev. Fr. Kettle’s Memorial Hall (a storey building) at St. Joseph’s Church premises.
Ilodibe contributed immensely towards the construction Nnamdi Azikiwe Stadium, Enugu; Catholic Secretariat, Nnewi; St. Stephen’s Catholic Church Yaba, Lagos. He also contributed to the then Anambra State Education and Technology Fund. And donated ambulance to Iyienu General Hospital, Ogidi, Anambra State. His business empire has fed thousands of mouths by way of direct and indirect employment and positively touched many lives.
He was a caring and loving husband and father. Married to Catherine in 1957, who also died the same month as him, but five years after him.