Notore To Expand Seeds Limited Business by Q2 2020

Kindly Share This Story:

The management of Notore chemicals industry said the company is very well positioned to maintain its leadership in the agro-allied and chemicals industry within Nigeria in the long term.

The report disclosed that the robust seeds demand to improve yields to meet rising demand for rice paddy to feed growing local rice meals; maize and sorghum seeds are in scarce supply to meet farmer needs to deliver on annual flour mills and breweries grain demands.

The company figure out that in the medium term, Notore plans to:

Conclude the construction of Train II Project by Q4 2022.

Expand Notore Seeds Limited business by Q2 2020.

Establish Notore as a gas hub and logistics service provider by leveraging on Notore’s access to abundant gas, its 560 hectares land, and its free trade zone developer status.

“Secure long-term strategic investments for other agro allied/petrochemical business lines.

While in the short term, Notore intends to:

“Conclude the TAM activities of the plant in Q3 2019. This will optimise the existing plant to nameplate capacity of 1500mtpd.

“Deepen its fertiliser distribution channels and expand its agricultural extension services network into neighbouring countries

We set up and commission a 2000 MTPD NPK blending facility and introduce NPK and specialty fertiliser blends into the market by Q4 2018 respectively.

The Notore management has concluded Early Works/Front End Engineering Design for fertiliser expansion project (Train II – Ammonia/Methanol and Urea) to commence by Q3 2019.

Commenting on the performance for the period under review, Onajite Okoloko, Group CEO, stated “Notore recorded ₦20.58 billion in revenue in the nine-month period. Though representing a 20.32% Y-o-Y decline to prior year revenue, this was largely due to sub-optimal capacity utilisation of the existing plant, he added.

In Okoloko’s words: “We have now secured funding to carry out the required turn-around maintenance (“TAM”) program of the plant, which is expected to be completed by the third quarter of 2019. This will enable the plant produce urea at its nameplate capacity of 1,500 MTPD, significantly above the 53% average capacity utilisation in the nine-month period to June 2018. We expect that the plant’s utilisation capacity will increase to a minimum of 90% after the TAM, positively impacting revenue on a like-for-like basis.”

GCEO disclosed that Notore has extensive Local and International distribution channels which guarantee that the Company sells all the fertiliser it produces. In addition to being the leading player in the fertiliser industry in Nigeria, and leveraging the inherent growth within agriculture, he said Notore’s key strength lies in its significant potential to significantly expand its operations and diversify its revenues due to its favourable location within a prolific gas hub and access to a jetty, which guarantees easy export of any products manufactured in the facility.

“The Brownfield status of the plant and available land mass creates expansion opportunities with reduced construction costs and risks.

“Our recent Listing by Introduction on the Mainboard of the Nigerian Stock Exchange provides access to an expanded capital pool to drive the Company’s strategic growth objectives”

“Urea production depends largely on the availability of natural gas and mechanical reliability of the plant.

Notore enjoyed uninterrupted supply of natural gas (the main feedstock in the production of urea) to its facilities during the period under review.

The plant achieved a capacity utilisation of 53% of its nameplate capacity during the period. Averaging 795 MTPD compared to 1500 MTPD due to mechanical reliability issues.

Mechanical reliability issues, which the plant experienced after many unexpected thermal cycles in 2013 and 2014 resulting from the disruption in supply of natural gas to the plant are being remedied and TAM activities are expected to be completed by Q3 2019.

The TAM program will restore the plant to its nameplate capacity.

The plant achieved its highest monthly capacity utilisation, 83%, in October 2017 and its lowest, 21%, in April 2018. The low capacity utilisation in April 2018 was caused by unexpected downtime from the gas turbine generator.

The Group has a robust management structure with requisite experience, competency and skills set and the management is supported by a highper formance workforce.

The Group maintained its key management staff during the period and expects to continually improve its workforce skill set.

Okoloko  said financial review showed the revenue declined by 20.32% Y-o-Y mainly due to approximately 18% reduction in production of urea for the nine-month period under review. Expected urea volume that the plant is supposed to produce in nine months based on its nameplate capacity of 1500MTPD.

“The price of Urea in the local market has been relatively stable in 2017 and 2018; hovering about ₦110,000 and ₦100,000 factory gate price per metric tonne in planting season and off-planting season respectively.

“The local market price of urea was more attractive than the export market price by approximately 40% during the period under review.

“The export market price has experienced approximately 20% volatility during the same period, hovering about US$250 per metric tonne (inclusive of freight logistics if exporting from Nigeria).

“Nigerian fertiliser demand is quite robust; consequently, Notore was able to sell all that it produced locally during the period under review.

“Demand is expected to continue to grow because of the Federal Government’s agenda to use agriculture as one of the keys to unlock the diversification of the Nigerian economy.

“Gross profit was up 14.20% Y-o-Y to ₦8.16 billion. This was driven by an exceptional item valued at ₦3.91 billion, which reduced the cost of sales.

“The exceptional item is in respect of the Export Expansion Grant confirmed receivable from the Federal Government of Nigeria on the cumulative export sales made by Notore between 2011 and 2016.

“These claims have been verified by the Federal Government and are awaiting settlement via promissory notes under the Federal Government’s Promissory Note Payment Programme.

“This resulted in a gross profit margin of 39.65%, up 1,200 bps Y-o-Y. Notore Chemical Industries Plc – 9M 2018 Results NSE Ticker: NOTORE 4 Notore’s cost of sales is well within its control.

“Natural gas accounts for approximately 80% of the cost of sales of urea fertiliser and Notore benefits from a 20-year fixed Gas Supply and Purchase Agreement priced at US$1.50/mmbtu, which was signed in March 2016.

EBITDA margin was 47.54% (9M2017: 39.04%).

EBITDA of ₦9.79 billion for the period under review, was 2.96% lower Y-o-Y. According to Group CEO, this was driven by a 34.02% Y-o-Y increase in operating expenses as a result of increase in administrative expenses (+28.31% Y-o-Y) – partly due to increase in employee benefits during the period, as well as selling and distribution expenses (+ 117.53%) to promote local sales during the off-planting season.

Net Finance Cost declined marginally by 1.21% to ₦7.69 billion during the Nine Month Period Ended June 2018 (9M 2017: ₦7.78 billion).

The Company recorded a loss before tax of ₦3.94 billion, relative to loss of ₦3.45 billion in the year ago period. Free Cash flow increased by 15.05% Y-o-Y to ₦7.21 billion. The Y-o-Y increase in the cash outflow resulted primarily from a lower outflow from working capital of ₦0.39 billion in the period under review compared to ₦4.02 billion in the year ago period. In addition, investment activities increased by 626.48% to ₦2.36 billion

 


Kindly Share This Story:

Related Post

Leave a Reply

Your email address will not be published. Required fields are marked *

amehnews greetings

x
%d bloggers like this: