Accounts - 1999

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Financial Highlights | Chairman's Statement | Profit and Loss Account | Balance Sheet | Cash Flow Statement | Five-Year Financial Summary | More Information

Financial Highlights

Year ended December, 1999

Chairman's Statement

From the 36th Annual General Meeting - 13th July, 2000

Distinguished Shareholders, Ladies and Gentlemen,

I am pleased to welcome you all to the 36th Annual General Meeting of our Company and to present to you the Annual Report and Accounts for the year ended 31st December, 1999. In order to appreciate the results, I shall dwell briefly on the business and political environment under which we operate.

The Business and Political Environment

In 1999, Nigeria successfully and peacefully resumed governance under a civilian democratic dispensation, after 15 years of military rule. This development also led to the resumption of international goodwill for Nigeria, as well as euphoria and renewed expectations amongst all Nigerians.

Pre-occupation with the conduct of a successful political transition, and teething / adjustment problems in the early months of our new democracy unfortunately meant that the economy and budget implementation was neglected.

Due to heavy spending by the departing military government, and consequent depletion of foreign reserves, the new civilian government was compelled to take drastic short term corrective measures to reduce foreign exchange demand, by dramatically increasing interest rates. For the second half of the year, interest rates averaged 36% per annum, up from 22% in the first half.

Government spending during the year has a very limited effect on improvement of consumer purchasing power. Consequently, companies with large inventories and trade debtors could not pass on increased costs of financing to the consumers by raising prices. The effects on their business were severe.

In the meantime, manufacturing costs continue to rise, with continued epileptic power supply from NEPA and increased rates and taxes from state governments seeking to increase revenue generation.

Sadly, various ethnic clashes in various parts of the country, as the year ended, depressed sales and increased the cost of transportation, as well as the additional misery index quite significantly.

1999 Performance

In NGC, we had to contend with the negative impact of the external conditions I briefly touched on earlier. Our biggest challenge continued to be to deal with the impact of tight cash flow on our operations.

The sharp increase in interest rates in early July compounded our cash flow situation, and affected our performance severely. As you well know, we convened an Extra-Ordinary General Meeting on 10th July 1999, seeking approval of the shareholders, to increase the paid up equity of the Company, through a rights issue. The proceeds were to be employed in improving our supply chain and reducing our liabilities.

I am pleased to announce that despite the shortfall in the rights issue, the management fulfilled its representations made in the rights issue prospectus, regarding company performance. Turnover was N1.156 billion, reversing the dip below the N1 billion mark in 1998. Operating Profit increased from N126.5 million in 1998, to N198.1 million in 1999. Despite a sharp increase in interest and similar financial charges, from N121.6 million in 1998 to N180.1 million in 1999, the profit before tax rose from N4.9 million in 1998 to N17.4 million in 1999.

This performance also reflects the benefits of our asset modernisation and operations efficiency enhancement programmes.

Outlook for 2000 and Beyond

The Federal Government budget for the Year 2000 contained several initiatives to alleviate poverty and to reflate the economy. It also included several measures intended to assist local manufacturers improve their fortunes. Of particular mention, raw material import tariffs for pharmaceutical products have been reduced, but sadly for the chemical business, some duties have been increased! The budget was also held up at the appropriate stage, and would have very little impact on the fortunes of most companies in this financial year. For our Healthcare business, high stocks of imported products in addition to late budget implementation will compromise the benefits intended in the budget.

There would also appear to be  little hope of a significant reduction in the cost of funds during the year, and improvement in infrastructure, especially public electric power supply.

The focus of management is on reducing the size of our bank debts by improving cash flow. To achieve this, management will focus on disposal of idle assets, improved supply chain management, reduction of operating expenses and product and customer rationalisation. The management will also be examining right structuring the imbalance between long and short term borrowings in its debt portfolio.

Improved cash flow will also enable management to launch new products, increasing capacity utilisation, and reducing unit costs.

Management continues to place high priority on strengthening sales and marketing activities. Particular emphasis is being placed on customer relationship management, to enhance sales.

Despite ongoing challenges in the operating environment and manufacturing sector especially, we are confident that the company is well positioned to deliver consistent growth and steady improvement in shareholder returns in the following years. Our modern production facilities are a source of pride for us. Several multinational companies have approached us to enter into production alliances. The proposals are being evaluated, and should yield us good income in the short term, pending development and growth of our portfolio of products to match our capacities.

Dividend Policy

As the Company continues to require cash to fund its operations and reduce its debts, we regret that there will be no dividend payout this year. This intention was stated before hand in the rights issue prospectus. We are sure that this prudent move will send the right signals to the investing public, and should improve the value of each quoted share on the Stock Exchange. We are confident that a further improvement in performance and reduction in bank debts during the year 2000 will afford sufficient cash flow to resume consistent dividend payouts. We appeal to all shareholders to understand the justification for this position.

Changes to the Board

After a year on the Board of the Company, and two years after joining the Company, Mr. Kartik Raina resigned, at the end of his employment contract, to be closer to his family in India. I know I speak well on behalf of members of the Board and management in expressing appreciation to him for his years of service, and in praying for success in all his future endeavours.

The Directors, on April 26, 2000 approved the election of Mr. T. S. Seenivasan to the Board. He heads the Finance and Commercial Division. He joined the company in September 1999, and he is a Chartered Accountant with wide and rich experience in Nigeria. Since joining NGC, he has performed commendably in strengthening the Company's financial and commercial management. I and on behalf of the other directors, give a hearty welcome to Mr. T. S. Seenivasan.

Management and Staff Matters

Despite the strains of operations during the year, employee relations remained cordial throughout the year, continuing a seven-year tradition. The management and staff of the Company deserve commendation for their efforts in this difficult year.

I am confident that they fully appreciate the enormity of the challenges they face going into the future, and are even better prepared to address these challenges now and in the future.

Conclusion

In conclusion, let me express my gratitude to all the shareholders for their continued support. The Company remains fundamentally sound, with a very strong asset base, essential to safeguard sustained long term growth and development. I am confident that long term shareholder value and returns are assured.

Thanks for your attention.

Abali Muhammadu – Emir of Fika
Chairman

Profit and Loss Account

Year ended December 31, 1999

Balance Sheet

At December 31, 1999

Cash Flow Statement

Year ended December 31, 1998

Five-Year Financial Summary

Year ended December 31,

More Information

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