"Between now and the next seven, eight years, our Group in Nigeria will have over 100,000 hectares of plantations," says the Chairman of Presco Plc, a company controlled by SIAT of Belgium.
Vandebeeck: Why Nigeria is preferred investment destination in Africa
Chairman of Presco Plc, Mr. Pierre Vandebeeck, spoke with Crusoe Osagie on the company’s investments in Nigeria and sundry issues affecting the Nigerian economy. Excerpts:
Generally, how is business?
Business, generally in Nigeria, is good. In fact, I can say that business in Nigeria is very good. We have just concluded our Board meeting this morning. And the management showed us our results for the end of the third quarter. And from that result, it is clear that 2014 will be for us a record year in terms of turnover, in terms of gross profit, in terms of net profit, and in all indices, including all areas of production. We are very satisfied with the work of our management team and the entire team as a whole
As the Chairman, you have targets and a vision for this company. Now, looking back five years ago, and looking ahead five years from now, how will you assess Presco Plc?
Five years ago is like yesterday. And our goals then and in the years ahead remain fulfilling our dream for this country by acquiring more hectares of land for our plantations, improving the quality of our products, employing more Nigerians and generally adding value to the lives of our shareholders, stakeholders and Nigerians as a whole. And all of these we focus on every year through our increased investments. Last year for instance, we invested about $40 million in this place. This year, we invested something similar, maybe a little less. We have just received from the management the first draft of their budget, which, among others, shows how in 2015 we are going to plant an additional 1,500 hectares of oil palm. We plant every year between 1,000-1,500 hectares. As for investments, we have a number of industrial projects in the pipeline. We are going to palletize our palm kernel cake, we are going to modernize and put up a palm kernel oil refinery and fractionation plant, so that we can produce bakery fat, which no company in Nigeria is producing today-it is all imported. We are going to put that in packs of 20 kilogrammes for the bakery and biscuit industries. This is a project that we hope to commission about this time next year. This is just one out of the five or six projects that we are going to implement. But, the kernel refinery, fractionation and crushing projects are the major ones for next year. These will cost about $10 million, about N15 billion or thereabout.
How will you fund these projects?
Largely through equity of our shareholders. We have about 11,000 Nigerian shareholders in this company. The SIAT Group of Belgium is the majority shareholder, and we are having a Rights Issue, which will be completed by the end of this year, that is, for existing shareholders. This will provide new shares at a discount and will beef up the equity of the company, on the basis of which we can leverage new financing. We also have in the pipeline a total of about N4 billion loan facility, which will enable us to carry out these ambitious programmes. So, coming back to your question on: “where are we going to be in five years”? Presco will be providing in five years twice as much oil as we are producing today, because we have already 5,000 hectares of immature plantations. We have another 5,000 to plant in the next three years. So, by 2017, we will have 20,000 hectares of palm oil planted. We are already the largest producer. By the year 2020, we will be producing 90,000 tons of palm oil in this place.
Now, besides equity, you talked of funding support through borrowing. How attractive are the interest rates?
Well, I must admit that, for the time being, this government is the first one that I know that has done something significant for agriculture in concrete terms. Under the agric credit scheme, we are getting loans on a single digit interest rate-about eight, nine percent-, and a grace period of two to three years, and a repayment period of seven years. This, to me, is adequate financing for a going concern like ours. For new companies, this may not be good enough, because to break even with new crops might take them seven to nine years, meaning that they may be in trouble if they have to service their debts before they are in production able to finanee. But, for a company like ours, this is a fantastic facility, and we were able to finance our energy programme. This is the first time we are benefitting so much from any government.
Okay, are there other forms of support you would like from the government?
Well, perfection does not exist in this world! I feel that government could do more in the area of taxation. Taxation rules and regulations are due for overhauling and should be designed for long-term investors. That is what has to be done. We have countries in West Africa where we operate, where corporate tax is zero. I will give you an example: Ghana. In Ghana, corporate tax is zero. And there is also import duty exemption on investment equipment. Cote d’voire is the same. In Gabon, it is more or less the same. In this area, Nigerian government still has a green field to develop. If the country wants 50 or more Prescos, they have to work on this. Nigeria is big enough to accommodate 50 more Prescos. Presently, the country has the advantage of increasing purchasing power of the people, economic growth and population explosion. In our business, we believe in the growth of Nigeria. And anything we produce is gulped immediately. The market is there!
Now, what lessons can other companies learn from your successful energy supply programme, which made you totally independent of national power supply?
Our investment in Biogas remained the best important that we had done, and we can recoup it in the next three to four years. In all our fields of investment, there is no one that pays back quickly as this one. If you invest in oil palm, it would take about six to seven years before you can think of paying back borrowed funds, but this one is the fastest. That is why, we say to others: Do it! This is part of our own Corporate Social Responsibility. We hear of global warming, climate change, environmental pollution etc, the Biogas project is our own way of saving energy and helping to protect the environment for future generation. I am proud that, by the end of next year, 85 per cent of all the energy we need will be internally generated. The one here, we have almost completed. The one in Ghana will also be completed next month. In Gabon, we have a coal generated and laboratory project to be completed next year. In Cote d’ivoire, we also have a coal generation plant project to be completed by the second half of next year. Other companies may believe in what we do, I hear everybody talking about energy and many other things, but beyond talking, the thing is to do it. Everybody is talking about the environment, everybody is talking about global warming, but who is doing what? We are going to save 10 million tons of diesel per annum because of the investment. That is our own contribution to global warming. These are facts, not just talking!
Now, with your business empire cutting across other countries in Africa, especially where you have industrial plants, let us have your comparison of business in Nigeria with these other countries?
Well, Nigeria is far ahead of all other countries .Honestly speaking, our Group believes in the future of Nigeria. If you want to be somewhere in Africa Nigeria is the place to be. That is my belief as a person. That is our belief as a Group. That is why we are pushing more investments here every year, not to say every month. We will be acquiring more land. Between now and the next seven, eight years, our Group in Nigeria will have over 100,000 hectares of plantations.
What is the attraction?
Well, as I have said, business is good in Nigeria. Our business here is quite profitable! That is the thing that drives business. Every human being is driven by margin. But, beyond this, we consider what we can do for the country. What we can do for the communities. So, we always ask: what can we do what do you want? We discuss and agree. In terms of employment, we have employed over 10,000 people. This guarantees food to hundreds of thousands of people. Altogether, the Group in Nigeria, we finance schools, provide boreholes, electricity. Sponsorships of various kinds, including sending children to school and for higher education, co-financing of projects etc. We even sponsor people to go and study some courses like Engineering, Agronomy, Accounting etc, asking them to come back and work with us later.
How do your interesting success stories translate to good fortunes for your numerous shareholders?
Today, all our shareholders are smiling to their Banks. They are very happy! We create value addition in every way possible. I do not have a Doctorate degree, but I know this business principle: ABC. C is the bottomline. A minus B is it, very simple. A is what you get, B is what you spend. You maximise what you get, and minimise what you spend. Our shareholders in Presco will always have the best. Every year they enjoy good dividends plus share value appreciation. So, anybody that wants to have a safe place to save does not need to go anywhere else but to Presco where they are sure that their share value goes up every year. As for those who want more shares, there is presently little or no opportunity because all that we have now are for existing shareholders. But, in the next one, two years, there will be an opportunity for new investors through a planned Initial Public offer (IPO).