December 02, 2008 2924 VIEWS
Proshare

 

 

Dunlop predicts daunting future

 

-Set to diversify into Real Estate

 

“It is clear that the tyre manufacturing business cannot continue to be run without positive intervention from Government to check the indiscriminate imports of tyres at low tariffs, which currently represents about 90 percent of the market offering. All efforts have been taken to achieve stronger internal efficiencies and despite this, the company finds itself still unable to compete with these cheap imports.

 

The cost structure applicable in their originating countries and the import-friendly tariff system and culture of sharp practices in our country, gives them a substantial advantage over our products. Coupled with the externally induced factors is the near collapse of key infrastructure mainly power and gas.

 

In view of this, we have gone through the process of strategically redirecting the business of the company and have identified certain profitable initiatives that will conserve and indeed improve our shareholders value. We are fine-tuning the business proposals and will present these to you very shortly (Source: Chairman's statement at Dunlop Nigeria Plc 46th Annual General Meeting)

 

 

Proshare NI sought to find out more about the tyre manufacturing company, Dunlop Nigeria Plc and its current challenges...

 

In this interview with PETER OBIORA of Proshare NI, Dayo Lawuyi, Chairman of the company discusses issues relating to the future outlook of Dunlop, its N2.0 billion loss in year 2007 Financial Year End (FYE), the plans to diversify the business of the company into the Real Estate and exploitation of the excess raw rubber in its Calabar and Sapele Nigeria Plantation.

 

Other issues discussed include reward for investors of the company, Government's import duty and funds for the proposed diversification. Excerpts:

 

 

Future Outlook

 

The future is going to be challenging, but one good thing I will tell you is that the company would be turned around; I can assure you about that. We decided to go into the tyre business, we did it so well.

 

At the time we were running it well, our share price was the fastest growing on the Floors of the Nigerian Stock Exchange (NSE).

 

 

Some people made so much money from our shares; then I was the Managing Director (MD) for about six years or thereabout. I am still around, I will not leave Dunlop until we change it and turn around the situation of the company.

 

 

It is the environment that has created this situation, but I can assure you that we would dominate that environment; we are not the complaining type, we would turn it around, and this would be done as quickly as possible.

 

 

I will not deceive you, we have taken actions; we have already started; and in the next couple of months, you will see changes; that would translate to financial benefits in the very short time.

 

 

FACTS CHECK;  As at Tuesday December 02, 2008, Dunlop opened at a price of N1.15 Kobo and closed at N1.27 Kobo (Source: NSE Daily Pricelist)

 

 

 

Dunlop and N2.0 billion loss in year 2007

 

We may have to look at ways and means of rationalising our assets with a view to cancelling the loss as quick as possible.

 

FACTS CHECK: “Turnover of Dunlop increased slightly from N5.064 billion in year 2006 to N5.980 billion in year 2007; indicating an increase of 18 percent in the review period.

 

Sales volume also grew from 7.22m kg in year 2006 to 7.89m kg in year 2007.

 

However, the 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 N2.0 billion was recorded in the year (Source: Dunlop Nigeria Plc, 2007 Annual Reports & Accounts)

 

 

 

Dunlop & diversification into the Real Estate

 

Dunlop would still remain in the tyre manufacturing business; however, the Board of Directors (BOD) of the company would seek other options and diversify its operations into areas such as the Real Estate and the exploitation of opportunities that has unfolded due to the excess raw rubber from our Plantations in Calabar and Sapele Nigeria.

 

We believe that these measures put in place by Dunlop would guarantee the restoration of values to stakeholders and help us make profit from year 2009.

 

 

Funds for Dunlop diversification

 

It is very simple, we have to rationalise our assets in a very responsible way. Dunlop would not just come up and announce it has closed its operations.

 

Things are not done that way, maybe you take a look at the things you don’t need, sell it off and it brings in extra cash and you channel it into something else. This should be done responsibly, in

Nigeria; it is a fact that people do not tell the truth.

 

In Dunlop, we have opened up to our investors and sought to clarify issues bothering them as regards the company.

 

 

Role of the Odu’a Investment and foreign partners in Dunlop

 

Odu’a Investment Company Limited (Odu’a) is aware of our activities; we do not have foreign partners anymore.

 

If you look at our shareholding structure, they are no more with us. The things we are doing are done on our own and we would succeed.

 

 

Again, the Lagos State Government (LASG) in whose consistency we are operating has appealed to the Federal Government (FG) concerning our plight, but nothing has been done on that.

 

 

Government and import duty

 

It is very painful, how would the government demand we invest at 40 percent duty and subsequently reduce it to 10 percent. It is not far; even when we had our member at the Federal Minster of Commerce, the situation could not be changed.

 

Government intervention

 

Nothing specific has been done by the government to this regard.

 

Dunlop and reward to investors in future

 

The investors should hold on to their shares, it may look unprofitable now; I am not selling my shares, I also have some, but I believe that things would move forward.

 

However, the situation of Dunlop was made worse by the current Market Meltdown on the Stock Exchange.

 

 

Dunlop is sitting on a huge asset; a 20 acre land and equipments that are worth billions of money.

 

 

EDITOR’s NOTE: This is the sixth year Dunlop Nigeria Plc has not paid investors dividend. The last time the company paid a dividend to investors was in 2001; when it paid a dividend of 0.15 Kobo to investors of the company.

 

End

 

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