Nigeria’s agro-chemical firm, Notore Chemical Industries Plc, recorded an operating profit of N2.99 billion in the three month period ended 31st December 2018, resulting in an increase of 412.4 per cent over its first quarter 2018 operating profit of N0.58 billion.

The result shows that although it needs to consolidate on repositioning for growth, a few of its strategies seem to be yielding fruits.

According to its Group Financial Highlights, seen by PREMIUM TIMES, Notore struggled through the years to reposition its operations to drive growth and expansion.

The company’s principal activities cover manufacturing, treatment, processing, production, and supply of nitrogenous fertilizer and all substances suited to improving the fertility of soil and water.

Additionally, it has a 500,000 metric tonne Urea Plant in Onne, Rivers State.

An analysis of the company’s financial accounts showed that several moves were made to reposition the company on the part of profitability within the years.

The company recorded revenues of N4.32billion for the Three Month Period Ended 31st December 2018, which represents Q1 2019 Financial Year, compared to N5.99 billion for the corresponding period in Q1 2018. The decline in revenue was largely due to plant downtime caused by a maintenance program on its plant during the period under review, the company said.

Market and Operational Developments

“The fertilizer market in Nigeria during the period under review was robust as Notore sold all the urea that it produced during the period into the domestic fertilizer market,” the company’s Head of Corporate Communications, Ngozi Mba, told PREMIUM TIMES. “Notore believes that the domestic fertilizer market is yet to reach its full potential. Furthermore, the demand for urea and compound fertilizers, such as NPK, from the West African markets and neighbouring countries bordering the northern part of the country is also quite significant.

“Constant natural gas (main feedstock for producing urea fertilizer) supply has been one of Notore’s key strengths. However, Notore missed its Q1 2019 FY production target because of the maintenance programme carried out during the same period. The maintenance programme built in some reliability into the plant and Notore expects to enhance its plant reliability further when it carries out its turn-around maintenance (“TAM”) programme later in the year.

“Notore has secured the TAM fund, which should be disbursed this quarter; nevertheless, it has commenced the ordering of critical components of the items under the TAM scope in order to keep with the TAM schedule.”

Outlook for the Year

For the 2019 financial year, Notore, Ms Mba said, expects to exceed its 2018 financial year urea production figures and also work on financial initiatives to reduce its finance cost.

The projected cost savings from Notore’s leverage is expected to boost its profitability. Furthermore, Notore believes that the current Federal Government policies in the fertilizer space and demand for NPK and NPK specialty blends are quite favourable for its business, consequently, Notore will be producing a significant quantity of NPK and NPK specialty blends this financial year to boost its revenues.

Galloping through re-positioning

In its 2017 financial statement, details showed that the group and company recorded losses before tax of N2.15 billion and N2.08 billion respectively during the year ended 30th September. Similarly, in 2017, the net current liabilities as of that date were N51.78 billion and N52.50 billion respectively.

“These circumstances,” the company said of its losses at the time, “cast doubt about the ability of the group and company to meet their obligations as they fall due and accordingly, the appropriateness of the use of the accounting policies applicable to a going concern.”

As part of measures to improve working capital and return the group and the company to profitability, the management of the company moved to restructure the company’s short-term loans and past due loan obligations totalling N41.94 billion as at 30th September 2017 into fixed long-term loans with varying maturities ranging between five and seven years.

In addition, to ensure that the current liabilities are reduced, the arrangement was designed in a way that would be subject to a 12-month moratorium on principal repayments with more favourable repayment terms.

The management also said that it raised fresh $40 million seven-year Term Loan facility from the African Export-Import Bank (Afreximbank), adding that the directors plan to utilize the proceeds of the loan for essential capital asset investments such as scheduled turn-around maintenance of production facilities, rehabilitation of the 25MW back-up gas turbine and procurement of critical spares for the production plant.

The company said at the time that on successful completion of the turnaround maintenance, Notore’s capacity utilization would increase to 95 per cent from its 75 per cent, leading to significant increases in future revenues and cash flows.

“Based on the foregoing, the directors are confident that the group and the company would be in a position to settle their obligations in the normal course of business and consider it appropriate to prepare the consolidated financial statements on the basis of accounting policies applicable to a going concern,” the company said.

Meanwhile, in 2018, the firm moved a step higher in its turnaround plans as its shares were listed on the Nigerian Stock Exchange on August 6. Details of the 2018 financials also showed that a total of 1,612,066,200 units of the company’s ordinary shares was listed on the NSE and with a Market capitalization of N100.75 billion on the listing date.

“Management believes that this will offer the Company an array of financing opportunities for its future expansion plans,” the company said. “In addition, it will enable the Company to broaden and diversify its equity share ownership to support its future growth and stability.”

Notore is a vertically integrated agro-allied, chemicals, and power and infrastructure company. As Nigeria’s premier producer of urea fertilizer in Sub-Saharan Africa, it prides itself as committed to helping Nigeria and the African continent become self-reliant in food production and economic wealth.

Under the leadership of Group Managing Director/CEO, Onajite Okoloko, after acquiring the assets of the former National Fertilizer Company of Nigeria (NAFCON) through the federal government’s privatization program, Notore has since grown into an agricultural phenomenon and is one of the world’s lowest-cost fertilizer producers, targeting local markets as well as exports.

After recently receiving Oil and Gas Free Zone Developer status from Nigeria’s Oil and Gas Free Zones Authority (OGFZA), Notore’s creation of a new Oil and Gas Free Zone is expected to become one of Africa’s largest petrochemical processing hubs.

The project is equally expected to pave the way for renewed foreign investment in the region, diversification of Nigeria’s economy, and boosting the country’s status as a global player in the market.