Cement makers' profits drop to 5-year low as tax credits expire

64 Pages·2017·12.13 MB·English

NEWS YOU CAN TRUST I **MONDAY 16 APRIL 2018 I VOL. 15, NO 33 I N300 @ g
Cement makers’ profits drop to Adeosun reassigns
portfolios in SEC,
Mary Uduk takes
5-year low as tax credits expire
over as acting DG
... demands explanation from
SEC on communications with
BALA AUGIE Lafarge Africa Plc, which control Dangote Cement received tax low of N172.87 billion as at NSE on Oando
about 90 percent of the Nigerian credits of N5.69 billion the same December 2017 from a profit of
Ac urious thing is hap- cement market. year (2016) and N10.43 billion in N263.71 billion recorded in 2013. ONYINYE NWACHUKWU, Abuja
pening to Nigerian Cement maker’s revenues tax credits for 2013. Combined profits for the 3 T
he Minister of Finance,
Cement makers. surged to a five year high in 2017, The cumulative combined firms was N196.08 billion in
Kemi Adeosun, on Friday
While revenues however profits (net income) sales of the three largest produc- 2014, N209.52 billion in 2015 and
approved the reassignment
are surging, profits are down from the highs of 2013 ers of the building material hit N204.77 billion in 2016.
of portfolios in the Securities and
are dropping, signalling fall- largely as a result of a dominant N1.12 trillion in December 2017 Investors and shareholders
Exchange Commission (SEC).
ing margins and higher tax player in the sector (Lafarge as against N607.56 billion re- will be bemused at industry
Mary Uduk will assume the
expenses. Africa) recording a loss, and corded in 2013 as they leveraged performance in spite of the fact
The firms analysed by Busi- expiration of pioneer tax credits. a hike in the price of products and that the market is largely an Continues on page 46
nessDay are Dangote Cement Lafarge Africa profits were Nigeria’s infrastructure deficit. oligopoly. Lagos-Badagry 2019
Plc, Cement Company of North- juiced in 2016 by an income tax However, combined profits Dangote Cement with a mar-
ern Nigeria (CCNN) Plc and credit of N39.7 billion, while for the firms fell to an all-time Continues on page 4
rail completion
doubtful as hoodlums
take over tracks
MIKE OCHONMA
T
here are very strong in-
dications that the 2019
delivery timeline for the
on-going road expansion that
provides for the rail mass transit
Continues on page 46
Inside
I&E window success snaps
Nigeria’s dependence on
L-R Adaora Umeoji, deputy managing director; Peter Amangbo, GMD/CEO; Jim Ovia, chairman, and Ebenezer Onyeagwu, deputy managing CBN dollar supply P. A2
director, all of Zenith Bank plc, at the 27th annual general meeting of the bank in Abuja, at the weekend.
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BUSINESS DAY Monday 16 April 2018
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Monday 16 April 2018 BUSINESS DAY
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BUSINESS DAY C002D5556 Monday 16 April 2018
businessday mark et monitor
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Azura IPP deploys 450mw full capacity to national grid
... as generation loss hits 1940mw agreement with Azura was so peak generation from 5,155MW
tight that if government de- to over 5,500MW.
faulted on payment it has seri- However, analysts are con-
On the whole the pow- to generate only 450MW. ous implications. This is unlike cerned about the ability of the
OLUSOLA BELLO
er sector lost an estimated But Jubril Kareem, energy the other power plants which Federal Government to sustain
T N979,000,000 on April 12, 2018 analyst at EcoBank does not were mostly acquired from the payment for Azura Power con-
he country’s yearning
due to insufficient gas supply, agree with this view. government, it was built brand sidering the huge cost involved
for improved elec-
distribution and transmission “Part of the reason the Azura new and they had the time to in settling the test power for one
tricity generation
infrastructure as well as water project was able to get funding mitigate all risk about not be- month..
inched closer to re-
reserves. and construction started was ing paid.” Azura secured a $900m debt
ality at the weekend
The Federal Government because the government com- Azura Power is the first Ni- financing from a consortium
as Azura Independent Power
through the Nigerian Bulk Elec- mitted to it and it has a very gerian power project to ben- of 15 banks from 9 different
project (IPP) successfully de-
tricity Trading Plc (NBET) re- solid power purchase agree- efit from both the World Bank’s countries, including most of the
ployed all it three turbines with
cently paid Azura Power the ment based on the realities on “Partial Risk Guarantee” struc- European development finance
combined generating capacities
sum of N8m being twelve per- ground. ture ($237 million of debt used institutions to build a 450MW
of 450 megawatts on the na-
cent of about N66 million for “Nigeria is one of the most to build the plant) and the po- Open Cycle Gas Turbine in Be-
tional grid.
test power sent to the national expensive places to generate litical risk insurance supplied nin City, Edo State,
This is expected to improve
grid in January, sources with power and if they are being by the Multilateral Investment Last month, it sent NBET, the
power generation a great deal
knowledge about the transac- paid according to the terms of Guarantee Agency. market bill for test power from a
and subsequently impact posi-
tion told BusinessDay. the power purchase agreement, Azura delivered on budget single turbine of 153MW deliv-
tively on electricity supply gen-
Meanwhile, Nigeria’s other there is nothing wrong with that. ahead of schedule by 7 months ered to the grid on December
erally across the country.
generating companies (Gen- Kareem further said, “The and could increase Nigeria’s 20, 2017.
This happened a day after the
Cos) will today hear judgement
power sector suffered partial
on a suit they filed against the
system collapsed and a severe
Federal Government for pri-
generation drop by 606 mega-
oritising settlement of its com-
watts hour (MWh/h) leading
mitment to Azura Power in the
to all the generating stations
N701billion power guarantee
sending out on the average
instituted to assuage DisCos
3,370602MWh/hour last week
failure to settle market invoices.
Thursday.
The rest of the GenCos have
There was nothing to suggest
received settlement up till Oc-
that the situation was much bet-
tober 2017 and since then their
ter on Friday even after Azura
invoices have remained un-
had deployed its 450 mw to the
settled according to Joy Ogaji,
national grid, as power supply
the executive secretary of As-
to Lagos and its environs has
sociation of Power Generation
been poor in the last few days.
Companies (APGN).
According to a presidency
“The situation remains the
source 1325.5MW was not gen-
same, we still have not received
erated due to unavailability of
payment for our invoices since
gas while lack of transmission
October last year,” she told Busi-
infrastructure was responsible
nessDay by phone.
for 40MW not generated.
Ogaji said that the lega-
Another 485MW was not
cy power plants which have
generated due to high frequen-
the capacity to generate over
cy resulting from unavailability
7,000MW of electricity were de-
of distribution infrastructure
nied a sovereign risk guarantee
just as reduced water level at
only for the Federal Govern-
the hydro at power stations
ment to give Azura the same
also caused the loss of 190 MW,
guarantee including a partial L-R: Ladi Balogun, group chief executive, FCMB Group plc; Tinuade Awe, executive director, regulations, Nigerian
thereby indicating that there is
risk guarantee from the World Stock Exchange (NSE); Oladipupo Jadesimi, chairman, FCMB Group plc; Olusegun Odubogun, non-executive
a shortfall of 1940mw in gen- Bank even when it has capacity director, FCMB Group plc, and Olutola Mobolurin, non-executive director, during the closing gong ceremony in
eration. commemoration of the newly appointed chairman of FCMB Group plc, at the Exchange in Lagos.
Cement makers see profits drop to 5 year... at N3.22 billion as at December The forecast which represents tional two million housing units
2017, representing a 106.50 per- 0.2 percent increase from the by 2020e from the public sector
Continued from page 1 compiling data. cent surge from the N1.56 billion 1.9 percent projected in October alone (as highlighted in the eco-
Lafarge profits for 2014, 2015 recorded five years ago. 2017. nomic recovery plan), will unlock
ket capitalisation of N4.4 trillion
and 2016 were N34.66 billion, Industry experts are upbeat “We expect revenue growth about 20-24 million tonnes (mt) of
has gained 13 percent year to date
N26.98 billion and N16.89 billion that economic growth under- to be sustained amid a faster cement over 2018e-2020e,” said
and trades at a price to book ratio
respectively. pinned by an increase in crude recovery in Nigeria, thanks to analysts at RMBNS, in a recent re-
of 5.4xs, according to Bloomberg
Lafarge had finance costs or oil price and production and the increased government infrastruc- port on Nigeria’s cement industry.
data.
interest expense of N43.02 billion introduction of foreign exchange ture spending ahead of the 2019 Lafarge Africa is spending
Lafarge Africa has a market
for the period, the highest in 7 system that help curb the crip- general election notwithstanding more to produce each unit of
capitalisation of N385.96 billion,
years, brought on by interest on pling dollar shortage will boost stiff competition,” said analysts at product as cost to income ratio
has returned -0.87 percent ytd,
borrowing incurred while paying future earnings of firms operating United Capital. increased to 83.03 percent, the
and trades at a price to sales ratio
the loans of subsidiary company, in the sector as they expect an President Muhammadu Bu- highest in 5 years; driven by the
of 0.87Xs.
UNICEM. uptick in the demand for building hari has presented a record bud- construction of Mfamsong evacu-
Data gleaned by BusinessDay
A breakdown of the combined materials. get of N8.60 trillion to the National ation road at UNICEM in Calabar
shows the major drag on industry
profit in the period under review The gross domestic product of Assembly for 2018. which failed as well as a full im-
profit growth is Large Africa Plc,
(2017) showed Dangote Cement Plc, Africa’s largest oil producer ex- Out of the total budget figure, pairment taken on a Pre-heater
a company grappling with rising
the largest producer of the building panded for three straight quarters N2.4 trillion has been earmarked project in ASHAKACEM which
costs and leverage that eroded
material recorded net income of last year after a 1.6 percent con- for capital spending. the cement maker hinted it has
margins.
N204.24 billion, flat from the N201.19 traction in 2016, with year-on-year Nigeria has infrastructure defi- discontinued.
For the year ended December
billion recorded in 2013. growth reaching 1.9 percent in the cit of $2 trillion, according to the The company is working to
2017, Lafarge Africa posted a loss
Dangote’s 2014, 2015 and final three months of 2017. Africa Finance Corporation. reduce energy and transportation
after tax of (N34.60 billion) from
2016 profits were N159.50 billion, The International Monetary Also, the 17 million housing costs as part of a turnaround plan,
a profit position of N16.89 billion
N181.52 billion and N186.62 bil- Fund (IMF) has projected that deficit is a low hanging fruit for ce- according to Michel Puchercos,
the previous year, the lowest in five
lion respectively. Nigeria’s economy will grow by 2.1 ment makers to grow sales volume. the Chief Executive Officer of
years since BusinessDay started
CCNN’s profit after tax stood percent in 2018. “We estimate that an addi- Lafarge Holcim Plc.
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COMMENT
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Send 800word comments to [email protected]
Severe head injuries (trust, deception and good neighbours)
“Nigeria is one of the most “Documents, including Findings also showed that this
In 1978, Dr. OlikoyeRansome-
cash vouchers, indicate that particular CBN release of N10 bil-
Kuti, who later became the Nige- dangerous places in the
$289,202,382 was released in cash lion was sourced in November 2014
rian minister of health, helped
world to give birth, with to the NIA by the Central Bank of from a N40 billion CBN released
establish primary health care as
the global standard.Tragically, the fourth worst maternal Nigeria from the Joint Venture (JV) funds meant for Corporate Social
BASHORUN J.K RANDLE Cash Call Account No. 000-0000- Responsibility (CSR).
40 years after Dr. Ransome-Ku- mortality rate in the world, 11658-366 of the NNPC/NAPIMS It was this N10 billion that the
ti helped other countries set a
Randle is Chairman/Chief ahead of only Sierra Leone, with JP Morgan Chase Bank, New source claimed former President
course for the future, the Nigerian
ExecutiveJK Randle Professional York, USA. Jonathan instructed the CBN gov-
primary health care system is bro- Central African Republic,
Services Chartered Accountants At the exchange rate then of ernor and the then NSA to deliver
ken. The evidence for this can be
and Chad. One in three N199 to a dollar, $289 million is to him personally in a private resi-
found in the epidemic of chronic
While we may dif- malnutrition, or stunting.” Nigerian children is ehqaudi vthaele mnto ton eayb onuott N b6e0e bni lsltioolne.n B,u itt denScoeu irnc eAsb suajiad. the money was il-
fer over the coup We also have the following chronically malnourished.” would be at today’s rate over N104 legally transferred using CBN van
d’état of 15th Janu- front page report from “The Nige- billion,” it added. for the use of “PDP presidential
ary 1966 and the rian Tribune” newspaper of 26th According to the Presidency primaries.”
counter coup of March, 2018: source, another set of illegal fund Responding to the allegations,
29thJuly, 1966, forensic auditors Headline: “How CBN moved was withdrawn under one week special assistant on new media
have submitted their cryptic re- over N100 billion to Jonathan’s series of illegal transactions,” the between January 8 and 16, 2015. to Dr. Goodluck Jonathan, Reno
port: residence ahead of 2015 poll” – source stated. It said the sum of N1.5 billion Omokri, said “this is nothing
“The Nation Was Left With Se- Presidency Sources The Presidency source also said was released in three tranches of but the desperate last throes of a
vere Head Injuries” This is nothing but desperation minutes of the CBN board meeting of N300 million, N400 million and government that came in through
That is what prompted Bill – Jonathan’s aide August 25, 2014 indicated the board’s N800 million. propaganda and is about to go out
Gates, the second richest man in “Few days after Vice-President approval of another N60 billion “This money was released from because of a lack of proper agenda.”
the world who was at the Special Yemi Osinbajo alleged that bil- requested by the former president the MEA Research Library Account In a statement on Sunday night,
Session of the National Economic lions of naira were withdrawn and released later by the apex bank. to the Join-trust Dimension,” an of- Omokori said the allegation was
Council held at the Presidential by former President Goodluck A Presidency source said the ficial source with knowledge of the false, adding that the former ad-
Villa on Thursday March 22, 2018, Jonathan-led government and sum, which was okayed by the CBN transaction disclosed. ministration was acknowledged
to declare as follows: shared a few days before the 2015 board, was not tied to any project The source further said the sum globally for its anti-corruption
“Nigeria is one of the most dan- elections, more details are emerg- or procurement and was meant and was transferred to their various po- drive.
gerous places in the world to give ing, showing how several tranches disbursed purely for campaign pur- litical associates, which included a “President Jonathan’s adminis-
birth, with the fourth worst ma- of funds were illegally removed. poses, through the office of the then former minister. tration has the enviable record of
ternal mortality rate in the world, According to a Presidency NSA and the State Security Services Further findings showed that advancing Nigeria’s anti-corrup-
ahead of only Sierra Leone, Central source, some new but dramatic (SSS) leadership at the time. N350 million was allegedly trans- tion war and delivered results to
African Republic, and Chad. One in details of how some of the funds Specifically that N6o billion that ferred to one of President Goodluck the point where we made our best
three Nigerian children is chroni- were illegally transported from the was okayed by the CBN on August Jonathan’s ministers on February ever improvement in Transparency
cally malnourished.” Central Bank of Nigeria (CBN) to 25, 2014was said to have been shared 2, 2015 and another N250 million International’s CPI in 2014, when
“The Nigerian government’s the private residence of the for- between the two security agencies was allegedly transferred to him on we moved eight places forward
Economic Recovery and Growth mer President Jonathan had now thus: N40 billionwent to the NSA February 19, 2015. from 144 to 136,” he said.
Plan identifies “investing in our emerged. while N20billion was released to the A document further showed He said there was nobody in-
people” as one of three “strategic In that particular case, the SSS,” it added. that yet another N10 billion was volved in ensuring the emergence
objectives.” But the “execution pri- former NSA [National Security While some of these newly released to the Office of the NSA of President Muhammadu Buhari
orities” don’t fully reflect people’s Adviser] personally supervised emerging fund disbursements have by the CBN on September 15, 2015. who had not secretly or openly re-
needs, prioritizing physical capital the physical transfer of the money been traced to the former NSA, The money was said to have gretted it, adding that “even his
over human capital.” from the CBN vaults to the private there were indications that some of been released in tranches of for- own wife, Aisha, is full of regrets
Here you can see Nigeria’s per residence of the former president. the funds were unconnected to the eign exchange of $47 million, $5 and has not hidden it.”
capita GDP growth from 2000 until “In one particular instance, ongoing defence contract trials of
million, 4 million euros and 1.6
today. If current education and over N70 billion was released in the former NSA.
million euros.
health trends continue—if you parts from the national treasury The $289 million mentioned
A letter from the Office of the
spend the same amount in these between January 8 and February by the vice president last week at
NSA in November 2014 further
areas and get the same results—per 25, 2015. The over $289 million- the seventh Presidential Quarterly
showed that the money was re-
capita GDP flatlines, with eco- which was also referenced last Business Forum for private sector
leased by the CBN as ‘funds for Send reactions to:
nomic growth just barely keeping week by the vice president is said stakeholders was released on Febru-
special services’. [email protected]
up with population growth. to be included in this particular ary 25, 2015.
Preventing ethical misconduct
compensation. Corporate Code of Ethics was in- the ethical values it has defined. consultants, regulators, etc. As
However, there is a thin line tended to help guide employees in Designating a corporate ethics much as possible, practical ses-
between excessive risk tak- “conducting the business affairs… officer of sufficient seniority, re- sions should beincorporated into
ing and unethical conduct. In in accordance with all applicable porting to the Board (this is criti- the training programs to ensure
the continuous effort to align laws and in a moral and honest cal) and an ethics management clarity.
shareholder value with those of manner.” Things didn’t quite pan team to manage Corporate Ethi- Having set out the ground
BISI ADEYEMI Managers, the Board seeks ways out as envisaged. cal Culture is an indication of the rules, the appropriate tone, there
Bisi Adeyemi is the Managing Director of of linking executive compensa- What then should the Board do? Board’s commitment and sends a should be asystem in place to
DCSL Corporate Services Limited. For tion to corporate performance. Typically, the start point is for the message that the Code of Ethics monitoremployee conduct to
comments and reactions, kindly contact Performance bonuses based on Board to define the culture of the and related policies are not per- ensure there is alignment with
[email protected]. profit and other metrics, share organization. This is a major respon- functory. In addition,hiring and expectations. A periodic review
options and grants are incen- sibility of the Board which it cannot firing decisions must incorporate of the various decision-making
Executives inevitably see tives that seek to achieve this delegate to Management. Clearly, the organization’s values. The systems and critical points where
themselves as respon- alignment. For the most part, drilling down across the organization performance appraisal process the organization may be vulner-
sible for the success of these are effective. However, will be the responsibility of Manage- must tie reward systems to indica- able should be undertaken. The
their organizations - and where the Board has not hired ment and monitored periodically by tors of integrity as well as to other Board should ensure that the
perhaps blame the microeco- executives with high ethical the Board. What values do we want measurements of productivity. Whistle Blowing Mechanism
nomic environment and other values, these tend to engender to espouse? What kind pf people do Furthermore, it is important to continues to be effective and that
factors when they fail. This sense bad behavior- performance at we want to be? How do we want to consistently reward integrity and whistle blowers are adequately
of accomplishment oftentimes all cost. do business? Once the Board has to make sure that these instances protected. It is good practice to
comes with a surreal feeling This is not to say that all that clarity on this, it needs to have this are publicized throughout the outsource the whistle blowing
of invincibility and executives is required is seeking and hir- documented in the form of a Code of organization. It is also important mechanism to ensure confiden-
sometimes have a sense that with ing “honest, morally upright Ethics, which provides guidance on that a transparent disciplinary tiality and encourage employees
all the responsibility on their and good people”. Executives compliance expectations. As much process is in place to deal with to use it. To ensure that it is not
shoulders, Non-Executive Direc- with a track record of “moral as possible, the Code should provide violations.There should be no perceived as a “feel good” or
tors should not question their uprightness” have been known examplesto guide employees and “sacred cows” and decisive action “nice to have”, it is imperative that
proposals as that would only dis- to “turn coat” or “succumb to clarify expectations. A Whistle Blow- should be taken where violation decisive action is taken against
tract them.Thus, they sometimes temptation”. In the same vein, ing Policy and appropriatemecha- is established – at whatever level. ethical misconduct – no matter
tend to take excessive risks which formulating a detailed written nism for implementation should also The Board should ensure that who the culprit is.
could put shareholders value at statement of ethics or specific be put in place. there is on-goingethicaltraining,
risk. Where these pay off, they documented policies do not The Board then needs to set the not just for employees, but for
feel justified to “extract” excessive necessarily prevent ethical mis- appropriate “tone at the top” by third parties the organization Send reactions to:
conduct. The 65-page Enron demonstrating a commitment to deals with – vendors, suppliers,
[email protected]