LAFARGE CEMENT WAPCO, SECOND TO NONE WITH LAKATABU PROJECT – CHIEF OLUSEGUN OSUNKEYE, CHAIRMAN
Osunkeye
This year, Lafarge Cement WAPCO Nigeria Plc. is celebrating five decades of what they termed 'bringing materials to life'. According to its company's Chairman, Chief Olusegun Osunkeye, the 50 years are not only measurable in the length of time alone 'but, importantly, LafargeWAPCO has had tremendous positive impact on its stakeholders, while leaving a visible and enviable landmark on the Nigerian industrial landscape.'
Explaining this, he said: 'We are in the business of 'Bringing Materials to Life', as we extract mineral resources from the earth and transform them into major construction materials. Our activities meet the basic needs of mankind, by providing materials for housing and infrastructure in the country, shaping the everyday surroundings of millions of men and women and the way our societies are being transformed. The brand has helped to build edifices, brought monument projects to life, created a serene atmosphere and positively impacted the lives of Nigerians socio-economically. That is why we are a preferred leader in the cement industry.'
Osunkeye disclosed that the company's brand, Elephant Cement, has consistently won the NIS certificate for product quality awarded by the Standards Organisation of Nigerian (SON) for over two decades now. In 2008, it commenced expansion project branded Lakatabu, a 2.2 metric tonnes plant which will double the output of the company. Its foundation laying ceremony was performed in February, 2009. It is expected to be completed in the first quarter of 2011.
Osunkeye, who is proud of the efforts of his board, the management and staff, to raise the flag of the company high, despite stiff challenges, is a man that needs no introduction. He is an industrial guru who bestrides Nigerian business terrain like a colossus. He is the Chairman of Nestle Nigeria Plc., GlaxoSmithKline Consumer Nigeria Plc., and the International Chamber of Commerce, Nigeria chapter.
Nine years after joining the board of LafargeWAPCO, on October 24, 2000, he was elected into the exalted position of the chairman, following the voluntary disengagement of Chief Bayo Akinola, who occupied the post for six years. In 1998, he was conferred with a Doctor of Science Degree (honoris causa) by the University of Agriculture, Abeokuta.
He is currently a member of the Governing Council of Ajayi Crowther University, and a facilitator at the Lagos Business School of Pan African University. He was a member of Senate of the University of Lagos from 2002-2007. He is a high ranking general titled chief, the Babalaje of Egbaland and, in 2003, he bagged the national honours of Office of the Order of the Niger (OON) in recognition of his significant contribution, through the private sector, to the industrial, commercial and agricultural development of the country. He had earlier served LafargeWAPCO as company secretary/accountant.
Speaking on the challenges facing the company, like its counterparts in the real sector of the economy, he said: 'The depreciation of the naira has continued to impact adversely on the cost of production and imported raw materials, thereby invoking fresh inflationary pressures and pushing up of the lending rates by banks. The banks, through their dire exposure to the capital market, experienced huge losses which almost crippled the banking sector.
The timely intervention of the Central Bank of Nigeria (CBN) and its prescriptions to remedy the situation unsettled Nigerians and their purchasing power to the economy, due to banks' inability or unwillingness to lend; resulting in liquidity squeeze. The Lakatabu expansion project is being part-financed from the company's internal cash flow. With the company's performance in 2009, the initial assumption on cash flow had to be reconsidered. Nevertheless,in the company is geared towards completing the project as planned and consolidating its position.'
He was, however, full of praises for those running the company in the face of the daunting challenges, saying 'I am particularly proud of the efforts of the board of directors, the management and staff of our company, despite stiff challenges, to raise the flag of our company above and aloft, and I give credence to their determination to regain for the company its reputation as the preferred leader in the cement industry.
The company was confronted with a lot of challenges in 2009. Energy crisis got to its peak in the country owing to the vandalisation of the gas pipelines. Production of cement from the two plants at Ewekoro and Sagamu were adversely impacted by an acute gas supply disruption for 82 days and 250 days respectively.' He has promised to grow the earnings of the company to make it second to none in the industry.In this piece, he explains how:
Business environment
The global financial crisis, which began in 2007, continued to bite hard on national economies worldwide. Its after-effects such as global credit crisis, bank failures and decline in various stock indexes continued to impact the global national economies. However, towards the end of the year, some developed economies began to exhibit signs of recovery. Nevertheless, the vulnerability of the Nigerian economy became more evident owing to its over-dependence on oil revenue.
The global financial crisis and its attendant capital flight from the Nigerian capital market put serious pressure on the economy. The banks, through their dire exposure to the Capital Market, experienced huge losses which almost crippled the banking sector. The timely intervention of the Central Bank of Nigeria and its prescriptions to remedy the situation unsettled Nigerians and their purchasing power to the economy due to banks' inability or unwillingness to lend; resulting in liquidity squeeze.
The exchange rate of the naira to the US dollar hovered around N150 during the year, thus, confirming the earlier warning of the Organised Private Sector (OPS)when naira began its gradual slide in the last quarter of 2008. Despite assurances by the CBN that the devaluation of the naira was deliberate and would not seriously threaten the nation's macro-economic stability, the nation has continued to witness an upsurge in the price levels of many products. The depreciation of the naira has continued to impact adversely on the cost of production and cost of imported raw materials; thereby, invoking fresh inflationary pressures and pushing up of the lending rates by banks.
Challenges
The company was confronted with a lot of challenges in 2009. Energy crisis got to its peak in the country owing to the vandalisation of the gas pipelines. Production of cement from the two plants at Ewekoro and Sagamu were adversely impacted by an acute gas supply disruption for 82 days and 250 days respectively.
As part of our response to the gas situation in the country, we introduced the use of expensive Low Pour Fuel Oil (LPFO) and we also consumed a sizeable quantity of imported clinker at a much higher cost. All these gave rise to the shortfall of about 6 per cent in cement dispatches compared with 2008.To ensure uninterrupted power supply as a result of continued epileptic supply from the grid, we had to depend mostly on Independent Power Providers' Generators that ran on expensive diesel.
Due to the above unfavourable circumstance, the company's operating profit for the year decreased by 32 per cent to N8.27 billion compared with N12.12 billion achieved in 2008. Last year, the company recorded a net income after taxation and exceptional items of N5.05 billion.
The Lakatabu expansion project is being part-financed from the company's internal cash flow. With the company's performance in 2009, the initial assumption on cash flow had to be reconsidered. Nevertheless, the company is geared towards completing the project as planned and consolidating its position. We are doing our best to grow our earnings. It is cost of cost elements in Nigeria, The more we can reduce cost of operations, the more we will increase our earnings.
We will continue to look into ways to reduce operating costs.
Considering the challenges of the expansion project, your board has therefore recommended a dividend payment of 10 kobo on every ordinary share in issue. We are proud of the loyalty, support and resilience that our shareholders have consistently displayed in the interest and ultimate growth of the company.
Expansion project
A €225 million Medium Term Syndicated bank loan, arranged to fund the Lakatabu expansion project, was concluded during the year. It has a 4-yar duration with a 2-year moratorium. I am happy to report that the construction work is going o as planned. The Lakatabu project is expected on completion to add 2.2 million metric tones to the current two million metric tonnes capacity from the two plants in Ewekoro and Sagamu. The project will continue to create value for our shareholders and all stakeholders at completion. The plant would be commissioned during the second quarter of 2011.
Excellence 2010
Building on the successes achieved throughout the Group on Excellence 2008, a new initiative has been launched tagged Excellence 2010. This is planned to last for 2 years. Priority action plans have been put in place, and they are expected to drive volume increases and cost reduction. The last initiative was a huge success in the company as a huge success in the company as it touched on key areas of our operations. Best practices were introduced; thus, one of the benefits of being a member of the Lafarge family.
Board changes
Since the last Annual General Meeting, High Chief Bayo Akinnola, the former Chairman, retired from the board. Mr George Lurandos, former MD/CEO, consequent on his retirement from the company, also resigned from the board.
I would like to acknowledge the immense contributions made by these gentlemen and the recognition and stature that they, together with other colleagues remaining, have bequeathed to our company in the business community. They leave the board with our best wishes and our prayers for success in their future endeavours.
Also the board has been replenished and invigorated by the nomination and appointment of my humble self, as chairman of the board; Mr Samy Abdelkader, a Mechanical Engineer with an extensive experience in Marketing as Managing Director/Chief Executive Officer, and Mr Jean-Christophe Barbant, an engineer and currently the Country Manager of the Lafarge Group in Nigeria (Non-Executive Director).
I would like to congratulate our esteemed shareholders, my colleagues on the board, management and staff of our company on this great occasion. I am particularly happy that the vision of our fathers is waxing stronger and stronger despite the unprecedented challenges that are confronting the company. It is a fact that the future of our company is quite promising and with continued support from all stakeholders, we will continue to improve upon its performance in the years ahead.
I am particularly proud of the efforts of the board of directors, the management and staff of our company, despite stiff challenges, to raise the flag of our company above and aloft, and I give credence to their determination to regain for the company its reputation as the preferred leader in the cement industry.
I would therefore like to thank my colleagues on the board, management and staff of our company for berthing at a credible landmark of achievements for which they should be very happy.I cannot but give the deserved encomiums to our majority shareholder, Lafarge SA for their immense support as technical partners and continued demonstration of commitment to make Lafarge WAPCO a significant entity in its global chain of business units. Also, I would like to seize this great opportunity to express my profound gratitude to the Oodua Group for their unalloyed support and for identifying with our great company.
Future outlook
Deliberate and calculated steps have always been taken to ensure that we modernise our plants and employ state-of-the-art equipment in our operations. I am happy to announce to our shareholders that a new packer is currently being commissioned in Sagamu. This will boost cement dispatches and enhance turn-around time of our dispatch lorries.
Also, a Dual-Firing Project has been completed in Sagamu while that of Ewekoro would be commissioned by mid-year. The project will give us the required flexibility to run on both natural gas and LPFO as occasion demands.
The future of the company lies in its ability to increase production capacity and to use modern machinery and equipment for its operations. This will enable the company to compete favourably in the area of cost, quality and through-put. To this end, the company has embarked on an ultra modern 2.2 million metric tonnes line, which will take the aggregate company capacity to 4.2 million metric tonnes. Steady progress is being recorded and the project is moving as planned.