MIRA
INFORM REPORT
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Report
Date : |
7th
June 2006 |
IDENTIFICATION
DETAILS
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Name : |
BENUE CEMENT COMPANY PLC |
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Registered
Office : |
Km 72, Makurdi – Gboko Road, Tse – Kucha, Gboko, Benue
State, Nigeria |
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Country
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Nigeria |
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Date
of Incorporation : |
1980 |
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Com.
Reg. No.: |
15545 |
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Legal
Form : |
Public Limited Company |
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Line
of Business : |
Manufacturing of cement. |
RATING & COMMENTS
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MIRA’s
Rating : |
B |
RATING |
STATUS |
PROPOSED CREDIT LINE |
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26-40 |
B |
Unfavourable & favourable
factors carry similar weight in credit consideration. Capability to overcome
financial difficulties seems comparatively below average/normal. |
Small |
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Status
: |
Moderate |
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Payment
Behaviour : |
Usually
correct |
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Litigation
: |
Clear |
EVALUATION
CONDITION: FAIR
AVG. CREDIT (USD): $1,500.00 PAYMENT: NO COMPLAINTS
IDENTIFICATION
NAME: BENUE CEMENT COMPANY
PLC
TRADING
STYLE: ‘BCC’
ADDRESS: Km 72, Makurdi-Gboko Road
Tse-Kucha,
Gboko
Benue
State
TELEPHONE: +234 1
610615
FAX: +234 1 610766
POSTAL ADDRESS: P.M.B.
063, Gboko, Benue State.
E-MAIL: N/A
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Subject is
into Manufacturing of Cement.
In Nigeria,
subject is considered to be a Large concern.
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Currency:
All monetary amounts quoted in this report are in Naira, the local currency, or
Dollars as the case may be. The
Exchange rate is =N= 135.00 to 1 USD.
SUMMARY
NATURE OF PREMISES: Owned.
Office space at head
office occupying
approx. 10,000 sq. meters
Date
Incorporated: 1980
YEAR
BEGAN BUSINESS: 1980
LEGAL FORM: Public Limited Company
REGISTRATION
NUMBER: RC: 15545
SIC
(US): 327598, 327501
EMPLOYEES: 1,149
SOLICITORS: Ityoyila Ukpi, Esq. (Barristers
& Solicitors)
AUDITORS: BDO,Oyediran
Faleye Oke & Co. (Chartered
Accts)
NOMINAL
CAPITAL: N500,000,000
paid up
Capital: N247,500,000
DIRECTORS
Alhaji
Aliko Dangote Chairman
Mr.
Olakunle Alake Director
Mr. D. V.
G. Edwin Director
Mr.
Olusegun Olusanya Director
Barr.
Aondoever Angmeh Director
Col. Basil
Kwenbeh (rtd) Director
Chief David
Attah Director
Sen. John
Wash Pam Director
Mr. Charles
Darko Director
Chief E. K.
Ashiekna Director
Mr. Bala
Idakwo Director
PRINCIPALS
Mr. D. V.
G. Edwin Executive
Director, Operations
OWNERSHIP STRUCTURE
Name %
Nigerian 96.0
Foreign
(Cementia AG) 4.0
DIRECT INTERVIEW
Please note
that all attempts at getting a Principal of the subject for an interview proved
abortive. Therefore details in this report are all from Secondary Sources.
AFFILIATED COMPANIES
DANGOTE
INDUSTRIES LIMITED
BANKER
1. Name of Bank: Intercontinental
Bank Plc
Address: Plot 999C, Danmole Street
Victoria Island, Lagos, Nigeria
Telephone: N/A
Year Opened: N/A
Account No: N/A
2. Name of Bank: Bank of the North Plc
Address: Ahmadu Bello Way
Kano, Kano State
Telephone: N/A
Year Opened: N/A
Account No: N/A
COUNTRIES OF IMPORT
INDIA, USA
TRADE REFERENCE
Cement
Manufacturers Association of Nigeria (CMAN)
Lagos,
Nigeria
INDUSTRY OVERVIEW/OPERATING ENVIRONMENT
When we
refer to the Nigerian Cement Industry we refer to the two main companies
controlling the industry. AshakaCem and WAPCO. Below is an analysis showing
their stability.
Benue
Cement is still struggling, but has a lot of potential. Apart from having the
second largest installed capacity after WAPCO, it also has the best location
because of the abundance of gypsum and limestone deposits in Benue State.
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WAPCO
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ASHAKACEM
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BENUE
CEMENT
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Since the
commencement of local production, the supply of cement in Nigeria has been
struggling to keep up with the pace of demand.
Cement was
an obvious product for the Government to consider for local manufacture back in
the 50’s due to the fact that demand would continue to increase in order to
develop the nation. Nigeria was providing an excellent export market for
Associated Portland Cement Manufacturers (APCM), which after negotiations with
the Government erected the nation’s second cement plant (WAPCO) in Ewekoro
where the quality of limestone is good.
In the early
70’s after the civil war, the Federal Government ran into need for cement in
order to rebuild the damaged nation, and ease housing shortages. With this
urgent need the Government had to rehabilitate the five existing cement plants
at that time, but all these could only be expected to produce 50% of the
nation’s demand. Government not long after experienced an oil boom and so
cement import licenses were issued randomly, and there was a massive influx of
cement into the country.
By the
early 80’s the Nigerian economy was severely out of balance, as the price of
oil fell. The country’s trade balance lurched into a deep deficit. The country
experienced a shortage of foreign exchange and so the cement plants had
difficulties in purchasing spare parts and raw materials needed to keep the
plants fully operational.
As a result
the badly run cement companies were barely functioning and could not run at
full capacity. The country had also been plagued with inflation and so prices
continued to rise. Distributors (middlemen) exploited the opportunity.
All the
cement manufacturers were facing delivery problems because of the
unreliability, poor quality and sharply escalating prices of the only kraft
paper bag producer at Jebba. The supply of fuel oil had also become erratic.
Lending rates were also increased.
Whilst
local production declined, imports continued to grow at a geometrical rate. The
country therefore, relied on importation of commodity to meet its requirements.
The
Honorable Minister of Industry was reported recently in the media of having
bemoaned the situation in which about
=N=73 billion was lost to cement importation in the past 10 years. With
imports already reaching 1.8mmt as at August 1999, it is expected that over 70%
of the nation’s cement consumption will come from import.
This
situation is not acceptable, more so when the commodity is strategic to the
nation’s goal to provide adequate shelter for the majority of its citizens.
Furthermore, reports of dumping low quality cement products by the importers
call for a re-assessment of the prevailing situation.
Gradually,
the local production is becoming a mere supplement to imports in a nation,
which has all the requisite raw materials and the technical know-how for cement
manufacture. These include: limestone, gypsum, coal/natural gas, as well as a
large market, which extends beyond the country’s borders into West African
Sub-region.
Distribution
zones of depots have been created by the companies, at which sub-distributors
have been appointed. The sub-distributors would buy cement from the zonal
warehouses at prices controlled by the company. Special allocations are then
made for projects of national importance and the company would deliver direct
to the contractors. The distributors are organizations that have a disciplined
market approach and possess proper warehouses and offices.
PROBLEMS OF THE INDUSTRY
FUNDING
One of the
major problems facing the industry is how to fund the Dollar cost of the
various modernization projects, which urgently needs to be carried out.
Undoubtedly, the cement industry needs long-term capital.
THE COST OF FUEL OIL &
SUPPLY
Depending
on the type of process being employed by the various plants, fuel oil accounts
for 30% - 35% of manufacturing cost. Thus a marginal change in the price of
Fuel Oil causes a very significant impact on production cost. For the plants
using gas, the price of gas is indexed to the price of fuel oil and such plants
have to absorb the same proportional increase in fuel price.
The
prolonged fuel scarcity the nation witnessed in the past has had a great
negative impact on the industry. Most plants today are not producing due to the
acute shortage of fuel oil (LPFO). The seven cement companies require about 34
tankers of fuel daily to maintain production at about 50% capacity utilization.
The situation has since been deteriorating since 1997, and the average
requirements are usually not met. For example in 1998, average daily recipients
came down to around seven tankers; representing only about 21% of the
industry’s requirement. In such situations, they are forced to purchase fuel
from the black market at a much higher price (100% higher), thereby increasing
the cost of production.
GOVERNMENT POLICY
Government
policy is very important in the development of the cement industry. However, it
causes a lot of harm, which hinders the total production when it is
inconsistent and inadequate. Policies on fuel oil prices, exchange rates, ban
on gypsum, imbalance duty rates and increase in electricity tariff affected
local manufacturers while the importers are not affected by most of the
policies.
OWNERSHIP STRUCTURE
In most of
the cement companies in Nigeria the government owns majority of the shares.
This is due to the Indigenisation programme in 1972. There is evidence to show that the companies that have the
government as majority shareholders have consistently under-performed. This is so because the government is very
poor in management due to frequent changes in top management and also in
allocating funds for working capital and in plant refurbishment.
POOR POWER SUPPLY
Power
supply has being erratic and those in the industry are forced to invest an
increasing amount of resources in self-generation of power to keep the plants
running. Power outages damage equipment particularly the kiln, which run
24hours a day and is only shutdown for repairs of maintenance. Each power
outage necessitates rekindling the kiln and can cause damage to its
lining. This effectively has increased
their manufacturing cost, as self-generated power is very expensive, and the
disruptions to production due to power cuts results not only in loss of revenue
but also a high cost for repairing and maintaining the damaged equipment.
IMPORTATION
In recent
years, importation of cheap cement from South East Asia countries has become an
increasingly important feature of the industry and looks to remain so in the
foreseeable future until Nigerian producers make the required investments to
reduce their production cost efficiently and competitively to discourage
imports. Local producers want the Government to ban the importation of bagged
cements due to the fact that there is danger involved in using sub-standard
cement for construction and infrastructure. This will also ensure strict
compliance with the Standards Organization of Nigeria (SON). They would prefer
it to be restricted to bulk importation whose supply in the Nigerian market
involves value added activities and is subjected to qualify verification and
certification.
TYPES OF CUSTOMERS
* General Public * Group of
Companies * Government Agencies
*Foreign Companies
FINANCES
Profit & Loss Account As At 31st
December, 2004
2004 2003
'000 '000
Turnover - 390,996
Cost Of Sales - (980,624)
Gross Loss (589,628)
Operating Expenses (402,853) (537,148)
Trading Loss (402,853)
(1,126,776)
Other Income 26,198 8,361
(376,655)
(1,118,415)
Interest Payable & Similar
Charges (535,186) (505,623)
Loss Before Taxation &
Extraordinary Items (911,841) (1,624,038)
Extraordinary Items -
898,487
Taxation (619)
(1,107)
Loss After Tax (912,460)
(762,658)
Loss Brought Forward (5,582,773)
(4,856,115)
Loss Carried Forward (6,495,233)
(5,582,773)
Loss Per Share (184k) (147k)
BALANCE SHEET AS AT 31ST DECEMBER
2004
Employment of Capital
Fixed
Assets 3,057,728 3,035,970
Long Term Investments 50 50
Current Assets
Stocks & Work-in-Progress 39,056 155,327
Debtors & Prepayments 4,408,049
240,393
Cash at Bank & Hand 10,172 393
4,457,277 396,113
Current Liabilities
Creditors: Amount due within 1 year
Borrowings 4,876,249
2,923,698
Trade & Other Creditors 3,734,320 3,155,411
8,610,569 6,079,109
Amount due after 1 year
Borrowings (2,463,922) --------
Total Net Liabilities 3,559,436 2,646,976
Capital & Reserves
Share Capital 247,500 247,500
Share Premium 153,400
153,400
Revaluation Reserve 2,534,897
2,534,897
Profit & Loss Account (6,495,233) (5,582,773)
Shareholder's Funds (3,559,436) (2,646,976)
RATING EXPLANATIONS
RATING |
STATUS |
PROPOSED CREDIT LINE |
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>86 |
Aaa |
Possesses an extremely sound
financial base with the strongest capability for timely payment of interest
and principal sums |
Unlimited |
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71-85 |
Aa |
Possesses adequate working
capital. No caution needed for credit transaction. It has above average (strong)
capability for payment of interest and principal sums |
Large |
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56-70 |
A |
Financial & operational base
are regarded healthy. General unfavourable factors will not cause fatal
effect. Satisfactory capability for payment of interest and principal sums |
Fairly Large |
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41-55 |
Ba |
Overall operation is considered
normal. Capable to meet normal commitments. |
Satisfactory |
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26-40 |
B |
Unfavourable & favourable
factors carry similar weight in credit consideration. Capability to overcome
financial difficulties seems comparatively below average/normal. |
Small |
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11-25 |
Ca |
Adverse factors are apparent.
Repayment of interest and principal sums in default or expected to be in
default upon maturity |
Limited with full security |
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<10 |
C |
Absolute credit risk exists.
Caution needed to be exercised |
Credit not recommended |