Posted by By Emele Onu, Finance Editor on
Barely six months after it scaled down production, Dunlop Nigeria Plc has formally announced its decision to cease tyre manufacturing in Nigeria.
Barely six months after it scaled down production, Dunlop Nigeria Plc has formally announced its decision to cease tyre manufacturing in Nigeria.
The company said at its 46th Annual General Meeting (AGM) in Lagos that it was shutting down its tyre plant pending improvements in the country's operating environment.
The management pointed out that in the present realities, Dunlop would redirect its resources to real sector business.
Chairman of the company, Mr. Dayo Lawuyi told shareholders that groaned the over N2 billion net loss recorded by the business for the 2007 financial year and who also suffered a loss per share of 44 kobo on their investments that Dunlop would not continue to expose its investments and assets to loses and have to cease manufacturing.
"It is therefore with utmost regret that your company will be following the steps of others by ceasing manufacturing operations in our factory. In that event, the attendant rationalization and restructuring of staff
strength will be carried out to ensure an orderly transformation from our current operations" said Lawuyi.
Michelin Nigeria Limited, a French company and Dunlop's former competitor in local tyre manufacturing left Nigeria's shores last year equally citing unfavorable operating environment.
Left in the lurch by Dunlop's demise from its core operational area are over 114,000 shareholders, a workforce of over one million, a retinue of creditors to the company, suppliers and other people put in excess of one million that earn a living indirectly from the organization.
Before it closed shop, Dunlop had been plunged in yearly loses and was in negative working capital position of over N2 billion as at the last audited financial statement (December 31, 2007).
The auditors to the company, Ernst & Young reported that "the condition the company finds itself indicates the existence of material uncertainty which cast doubt about its ability to continue as a going concern."
Lawuyi has always attributed the company's woes to policy somersault by the government and the dearth of basic infrastructure in the country.
"Public power supply continues to be a challenge and even though of late we have witnessed some reduction in the prices of diesel the cost of running generators remain a substantial portion of operating expenses," he told shareholders.
According to him, "the recently announced Common External Tariff Structure which created a fifth band in the tariff on goods manufactured locally to encourage local industries has not addressed the problems of our particular sector. As a matter of fact, the structure has revealed an even less favourable position than what obtained before, as it reduced the total duty on car tyres to 40 percent from 50 percent while duty on tyres remained 10 percent."