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   Market Date: 23-01-2015   
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Dunlop hinges hope of full recovery on favourable govt polic

Category: Investors NewsBeat

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Dunlop hinges hope of full recovery on favourable govt polic

By Franklin Alli  


DunloP Nigeria PLC, has hinged hope of full recovery on favourable government policies in terms import tariffs, incentives and power supply.


But the company recorded a cumulative net losses of N3. 7 billion between 2003 -2007.Analysis of the company’s five year financial summary showed that the company has been incurring losses since 2003.


A breakdown of the figure showed that the company posted the following loses: N296. 903 million in 2003, N316,027 million (2004) N204, 609 million in 2005 and N667, 356 million in 2006 and N2,093 billion in 2007, totaling N3,692, 578 billion.


The company’s Chairman, Jabez Dayo Lawuyi, however, blamed the persistent decline in the company’s performance to infrastructure, especially electricity and gas, which he stated does not allow for efficiency in production.


According to him, the fundamentals of the business do not show any sign of recovery and are not likely to recover without the intervention of government in areas of macro economic and infrastructure policies such as import tariffs, incentives and power supply.


His words: “ Performance in 2007 was rather disappointing as key fundamentals of the business that is volumes, capacity utilisation, margins and cash flows, collapsed during the period.  The collapse was largely the result of the uncompetitive tariff structure which took its toll on sales volume, as well as unprecedented gas supply outages which negatively affected the level of product availability.  Electricity supply itself became even more erratic.


Turnover at N5. 99 billion was a slight improvement on performance in 2006 (N5.06 billion).  Sales volume did also increase from 7.22m kg in 2006 to 7.89m kg.


This sales increase was due mainly to the introduction of the new heavy truck radial tyres which accounted for 1.4m kg.  Overall margins however shrunk significantly and an abysmal loss of N2 billion was recorded in the year.  He pointed out that the major challenge being faced by the company in the market is the increasing competitive pressures from imports which come in at only 10 per cent tariff.


The import, he noted, now makes up about 90 per cent of the market share and consequently dictate the market price.


“The effect of this is a significant and continuing deterioration in the market which has led to a considerable drop in our anticipated margins,” he said.


“The conclusion of your Board is that as things stand now, it will be impossible to resume full manufacturing process and it will not be appropriate in the circumstances to continue to expose your investment and the company’s assets to the current business structure. It is therefore with utmost regret that your company will be following the steps of others by ceasing manufacturing operations in our factory if the situation as we have it now is not redressed urgently.


Following cessation of manufacturing, your Board would, in addition to the decision to remain in the tyre business, put in place, other measures to diversify its operations.


These measures would include a substantial redirection of our resources into Real Estate and agriculture as a result of excess raw rubber from our plantations. – vanguardngr




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