BusinessDay 06 Mar 2018

Tuesday 06 March 2018 BUSINESS DAY 13
COMPANIES
& MARKETS
Company news
analysis and insight
Banks’ capital adequacy
could worsen on IFRS 9
Pg. 14
Nestle Nigeria generates earning well
above levels seen 5 years ago
BALA AUGIE
Nestle Nigeria Plc
generated Naira
earnings well
above the levels of
the past five years
as the company continues to
surmount the headwinds brought
on by weak consumer spending,
rising input costs and currency
volatility.
According to the company’s
2017 audited financial statement,
net income hit N33.72 billion,
which represents a 325.25 surge
from N7.92 billion figures recorded
in the corresponding period of
2016, which is still higher than the
5.50 percent growth recorded in
2013, when profit was N22.25 billion,
as the chart shows.
A price hike across key product
line, the introduction of market
penetrating products, and the
introduction of the flexible exchange
by the apex bank helped
underpin Nestle’s performance
as sales spiked by 34.21 percent
to N244.15 billion in December
2017 from N181.91 million as at
December 2016.
This compares with the 14.03
percent year on year growth in
sales for recorded in 2013, 7.69
percent uptick in 2014,5.54 percent
increase in 2015 sales and 20.15
percent year on year increase in
sales in 2016.
The precipitous drop in operating
performance in the years
2014, 2015 and 2016 was due
to rising inflation, severe dollar
shortages, currency devaluation
as raging Islamists insurgency
in north limited the company’s
product distribution channel. A
sharp drop in oil price combined
with severe dollar shortages of
mid 2014 hindered manufactur-
frowned at.
“Because of the low rate they
demanded on their insurance
policies in most cases, they outbid
their competitors for businesses
and consumers always want to go
for policies with lower rates.
“However, in the event of
claims, the overzealous underwriters
do default because the premium
they charged is not the actual value
of the products. ” she said.
Adegbayi advised policy holders
to fight for rate-cutting by requesting
for claims on their insurance
policies.
She said that would discourers
from importing raw materials
and equipment to meet production.
Firms had to buy currency at
the inaccessible black market
rate, which resulted in imported
inflation as raw materials costs
spiked.
The de facto devaluation of
the currency in 2015 to N198/$
damped consumer spending
hence undermining the revenue
and margins of Nestle’ and its
peers.
In 2016, the economy capitulated
to the vagaries of macroeconomic
shocks and tumbled into
its first recession in 25 years while
inflation rate were at all-time high
of 17.21 percent in the month of
October.
However, the gross domestic
product of Africa’s largest oil producer
expanded for three straight
quarters last year after a 1.6 percent
contraction in 2016, with
year-on-year growth reaching 1.9
percent in the final three months
of 2017.
An increase in crude prices and
the introduction of a new foreignexchange
system that ended a crippling
shortage of dollars helped
attract more investment flows into
the country, while paving the way
for consumer goods firms to have
access to dollars.
The above economic recovery
showed face in the numbers of
Nestle as net margins, a measure
of efficiency, surged by 2300 basis
point to 22.98 percent in December
2017 from 4.35 percent as at
December 2016, the strongest
growth in 5 years since Business-
Day started gathering data.
Nestle’s closed at N1400 as
of Friday’s trading session on the
Nigerian Stock Exchange, valuing it
at N1.11 trillion, the stock is down
10.06 percent.
Nigeria may lose
quest for regional
port hub as Antwerp,
Dakar sign agreement
on collaboration
– expert
Obinna Okoafor, a maritime
expert, says Nigeria’s
desire of becoming
a regional port hub for
freight in the West and Central Africa
Region may no longer be achieved.
Okoafor, a Licensed Customs
Broker, made the observation while
reacting to the Port of Dakar Senegal-Belgium
partnership agreement
signed on Friday.
He said that with the agreement,
Nigeria’s desire of becoming
a regional maritime hub was under
threat.
The maritime expert told the
News Agency of Nigeria (NAN) in
Lagos on Sunday that the two ports
were working to collaborate closely
in the years ahead.
According to him, the Port of
Antwerp, the second-largest port
in Europe, seeks to reinforce its
historic position as leader on the
coast of West Africa by partnering
Dakar Port.
“The Dakar port, on its part, is
leveraging on the collaboration as a
way to position itself as the main regional
hub for freight for the region,
a position Nigeria is eyeing.
“By the time all necessary formalities
are put in place by the two
countries while Nigeria ports are
still contending with lack of desired
infrastructure, the port of Dakar
will take the status of the regional
maritime hub.
“It is not in Nigeria’s interest to
lose the regional maritime hub status
to another country going by its
efforts and contributions to peace
process in the region,’’ Okoafor said.
He said it would amount to
exporting the much needed jobs
Insurance expert implores Nigerians to
demand genuine claims from Insurers
The Executive Director,
Leadway Assurance Limited,
Adetola Adegbayi on
Saturday advised Nigerians
who bought insurance policies
to demand claims from their insurers
whenever they incurred risk on
what they had insured.
Adegbayi said this at a media
training session by the company
in Lagos.
She said some Nigerians with
insurance policies were ignorant
of when and how to make claims.
She advised policy holders
to always endeavor to meet their
insurers to make claims, instead
of deciding to bear the financial
burden themselves.
She said the move would attract
more Nigerians to key-in
into insurance and support the
National Insurance Commission’s
(NAICOM) market development
initiatives.
She said that because some
holders were not demanding
claims, some operators had cashed
on this loophole.
“What they do is to rate-cut
policies to unreasonable price, with
the assumption that the insured will
not demand for compensation, a
pathetic situation NAICOM always
age underwriters from exploiting
policy holders, would sit up and
charge the normal rates that could
sustain them when request for
claims arises.
Adegbayi also advised Nigerians
to report defaulting underwriting
firms to NAICOM and the law enforcement
agents.
She said that necessary steps
would be taken to pay commensurate
claims to the aggrieved
insured.
“Any insurance company found
to have erred will by defaulting in
claims obligations will be heavily
sanctioned by NAICOM, ” she said.
to Senegal, while Nigerian youths
walloped in joblessness.
He called on port managers to
fast track policies aimed at port
development to make the Nigerian
ports attractive to shippers.
NAN reports that with an annual
freight volume of 17 million tonnes,
Dakar is one of the largest ports on
the coast of West Africa.
The port city occupies a uniquely
strong position on the world.
The signing ceremony was attended
by Belgian First Minister,
Charles Michel and its Deputy First
Minister and Minister of Development
Cooperation, Alexander De
Croo, both on a working visit to
Senegal.