In a twist of events Nigeria’s
indigenous multinational, Dangote Group, bought back a subsidiary it had
built and sold off. In this interview, the Managing Director of one of
the foremost flour, noodles and pasta producer, Dangote Flour Mills,
Alh. Ahmed Yakassai, explained what happened, the results and impacts.
Dangote flour mills journey
We are Nigerian company and we are
grass rooted and know the environment, people and culture and we know
what it takes to succeed in this environment. We are managing it in the
Nigeria way and are succeeding. Dangote Flour Mill came as a result of
industrialization policy of the Group dated back to 1997, when we moved
from trading business to manufacturing business. It was at that time
that the Group President, Aliko Dangote, said enough is enough, and
whatever they (foreign manufacturers) can do we can do it here. And we
changed the concept and idea of the business from an import based
trading company to a manufacturing company. And Dangote Flour Mill
happens to be one of the pioneer companies.
Ahmed Yakassai Ahmed Yakassai By 2001,
the first mill was ready at Apapa, Lagos with a capacity of 500 metric
tons per day. And today we are in Kano, Ilorin, Calabar with a combined
capacity of over 7000metric tons of flour per day, and pasta and noodles
also came in. In the journey, we sold Dangote Flour business to a South
African company for few years. But expectations of the shareholders
were not met. They were not making money, and so Dangote Industries had
to buy it back. We took it over in January this year. I will say that
today the result is there for everybody to see. It is on the papers,
stock exchange. We have moved from a loss making company to a profit
company.
Internationalisation of Dangote Flour
We have got requests from our partners
to come and set up in other countries. But internally, we have a lot of
gaps to fill. Food security is our number one priority and so we feel
that in the time being we would meet the local needs in all its entirety
and then we would move out to set up plants outside the country. But
now, the local demand needs to be met.
Competition
We are not bothered about competition
because as a priority, quality products and customer service, are top on
our agenda. We are producing the best quality. We are servicing our
customers very well, we deliver to them at their door steps.
Jump in Income
We have moved the revenue in terms of
production capacities and we have more than doubled our capacities in
the last 6months, so naturally the revenue will increase. We are grass
root rooted company, so we are there with our products before any other
wakes up.
If you check the numbers, you can look
at the volume that was produced in the previous year, compared to what
we’ve produced today, and you can look at the revenue that we have
gathered within this period compared to last year. So it is basically
having to bring to the table some wealth of experience in Nigeria where
we are rooted, trusted and we are a known first consumer goods company
and we will continue to give them the best of our products and services.
Profitability
Yes it is as a result of this. As at
September we moved from a loss of over N2 billion last year to a profit
of over N5 billion. If you look at the Dangote Flour group it comprises
of the flour, pasta and noodles. Some aspects of the group are just
coming up the ladder and they are not exactly where we want them to be.
Sometimes you allow this kind of things to happen so that you can
reposition them and we are in the process of repositioning all the
businesses to turn into good numbers, and that will happen; soon you
will see it in the results.
Costs
We are doing everything possible to
control cost as a challenge to management but this is basically related
to other sectors of the economy. Increases in input due to exchange
rate, it is really out of control in some cases, but we are doing our
best at all times to make sure that we bring it to reasonable limit. It
is also not limited to us and we are not all in all because we depend on
other sectors.
Group support
I must say the support from the group
has been tremendous and it is the support that has made us succeed
beyond our expectations. They are there come rain come shine and they
are making sure that we attain whatever level that we are today. If I
take you a little back, those numbers, if you look at our distribution
cost, energy cost.
When we started the year, we had a budget of N90 to a
liter of diesel, but today a liter is over N200 and so you can imagine
the impact. It is beyond what we can do. So while the Group sometimes
goes with an import, some other times we have to go into the open market
like any other company. Some of the cost is as a result of the
activities in the economy that are beyond us. And when those costs are
controlled the profitability will be higher. Of course the product would
have landed to the consumers at lower price than what it is now. I have
to buy the dollar at the market price and not my own price and that
translates to the selling price of my product.
Forex challenges
Despite everything I think the CBN and
the government are doing very well in managing the situation. Of course
it could be better. Definitely it is a difficult situation and you can
see from all corners that they are doing everything possible to help
industries and that is what should be the right thing to do. For a long
time we have been import based, but by the time everybody settle to the
fact that we are a big country with such a huge market size, people
would come and start to produce here. Even the spare parts and other
things that we import are going to be produced here in Nigeria.
Government should invest in research and development and they should
help people to grow wheat all over the country because wheat is 80% of
our raw material. We have the land, water and human resources.
Government should provide the right infrastructure and people will
produce what we consume and even export.
Dangote Group backward integration
Within Dangote Group, for example, the
sugar refinery, we are investing in plantations in Adamawa, Jigawa and
other states, we are investing in sugar-cane production so that we would
have enough raw materials to produce our sugar.
The cement is an old
history that we know very well that everything is now local. For the
flour, through the wheat growers association all the flour mills in the
country are investing money so that the association would be encouraged
to grow more wheat. Along the line we will substitute the imported with
local wheat. It is going to take some time, because it is not rooted in
the people to grow more wheat.
Price of bread
As I said earlier, once we are able to
address exchange rate, then what we are paying for the wheat import
would be less and that would translate in the selling price of flour and
by extension the price of bread in the market. The second factor is
that once we are able to grow enough wheat here in the country, it is
not going to be 100 percent, maybe we need to blend with the imported
higher quality to get the best quality, and naturally the cost of flour
would come down and bread as well.
Competition from imports
Today officially there is no
importation of pasta. But if you go round you would see it in the
supermarkets, border towns gradually and slowly, it is getting into the
market. It is an open secret. But officially it is not allowed. So we
are encouraged and we feel that at a certain point in time, there will
be a big stick that will say, you can’t even display it in the
supermarket. We put our case to the government through the right channel
and we know the government is listening and are doing something about
it.
Message to stakeholders
It is a public knowledge that we have
moved from a loss making company to a profit making one. At the last
Annual General Meeting, the Chairman had told the shareholders what we
are doing towards improving their lot. We are following through on this.
In the stock exchange, everybody knew we were down to N1.00, but today
we are over N4.00.
Next five years
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