Why Notore’s share listing injected over N100bn into stock mar

Notore Chemical Industries Plc was recently registered on the Nigerian Stock Exchange (NSE), which led to the market capitalization of the exchange by more than $ 100 billion.

The ceremony was greeted with enthusiasm among the investment community, as it was also the first listing of the stock exchange this year.

Explaining the reasons for the listing, Managing Director / General Manager of Notore Group Mr. Onajte Okolko stated that he will support the efforts of the federal government to deepen the capital market, increase the liquidity and tradability of the company's shares and increase their visibility and reliability in the Nigerian market and beyond.

"The listing will also increase access to capital to finance future growth initiatives of the company and give Nigerians the opportunity to participate in the growth history of Notore," he added.

In addition to these reasons, the Notore list makes its stock, which investors should be looking for, seeking long-term value.

Typically, investors in the stock market are looking for stocks with good prospects and potentially can bring significant returns on their investments.

One way to determine such stocks is the industry in which they work, and the company's ability and ability to supply all financial parameters that will ultimately lead to a positive return.

Notore can offer investors who value in the long term.

The company, formerly known as O-Secul Fertilizer Company Limited, was founded in 2005 to acquire the main assets of the National Fertilizer Company of Nigeria (NAFCON).

The company, a vertically integrated agro-union, chemical and energy group based in Onne, Rivers State, has six subsidiaries, including Notore Supply & Trading Mauritius Limited, Notore Power Limited, Notore Seeds Limited, Notore Foods Limited and Notore Industrial City Limited.

The company is a leading manufacturer of fertilizers traded on the local market and exported to West Africa, South Africa and Europe. Given the efforts of the federal government to diversify the economy, with special attention to agriculture, companies working in the agricultural union have a huge reserve for growth.

It is for this reason that many investors view Notore as a future stock.

Speaking about the company's operations, Okruko said: "Our main business is the production and sale of fertilizer products, which are sold locally in Nigeria and exported to West Africa, South Africa and Europe.

"Our key strength lies in our enormous potential for diversifying our revenues through our advantageous location in a tight gas hub and access to the pier, which guarantees easy export of any products produced at the facility," he said.

He said that Notore is the only producer of urea in sub-Saharan Africa with gas control and has an extensive distribution network in the local Nigerian market.

According to him, Notore sells 75 percent of its fertilizer on urea and exports 25 percent to leading international traders such as Helm Ag, Ameropa and Yara.

"Notore is a licensed independent electricity producer that generates electricity for use in a fertilizer plant and residential real estate with excess capacity available for sale to neighboring parties. The capacity of the power plant is 50 megawatts (MW) with its own needs ranging from 8 to 13 MW, "said Okruko.

After listing, the company published its unaudited results for the nine months ended June 30, 2018. It showed revenue of $ 20.584 billion. The US, which is 20.3% less than in the same period in 2017.

However, gross profit increased by 14.2% from N7.114 billion to N8.161 billion.

This was due to an exceptional commodity worth N3.91 billion, which allowed to reduce the cost of sales. The exclusive point was with respect to the grant for the expansion of exports to be received from the federal government, on cumulative export sales produced by Notore in the period from 2011 to 2016.

The cost of sales of the company is under its control. Natural gas accounts for about 80 percent of the sales of fertilizers with urea, and Notore for a 20-year fixed agreement on the supply and purchase of gas at a price of 1.50 US dollars / mmbit, which was signed in March 2016.

Notore also reported a pre-tax profit, depreciation and amortization (EBITDA) of 47.54 percent, compared to 39.04 percent in 2017. According to the company, its EBITDA for 9.99 billion dollars. The US for the reporting period was 2.96% lower, which was due to an increase in operating expenses by 34.02% as a result of an increase in administrative expenses – in part due to an increase in employee benefits during the period, as well as sales and distribution costs to stimulate local sales during off-budget expenses, landing season.

Net financing costs decreased slightly by 1.21% to N7.69 billion from N7.78 billion in 2017, and the company completed a pre-tax loss of $ 3.94 billion. United States compared to a loss of $ 3.45 billion. The US for the corresponding period in 2017. However, the free cash flow Notore increased by 15.05 percent to N7.21 billion.

According to Okolenko, "Notore registered revenue of $ 20.58 billion. For the nine-month period under consideration. Despite the decrease of 20.32 percent compared to the previous year's income, this was largely due to the non-optimal use of the existing plant's capacity. "

"We have now secured financing for the required maintenance program (TAM) of the plant, which is expected to be completed by the third quarter of 2019. This will allow the plant to produce urea on its nameplate with a capacity of 1500 mt. which significantly exceeds the average capacity utilization rate by 53 percent in the nine months to June 2018.

"We expect that the plant's capacity utilization will increase by at least 90 percent after TAM, which will positively affect revenues as a similar basis," he said, adding that Notore has extensive local and international distribution channels that ensure that the company sells everything fertilizer, which it produces.

The Managing Director / CEO of the group said: "In addition to being the leading player in the fertilizer industry in Nigeria, and also due to its own growth in agriculture, Notore's key strength lies in its significant potential to significantly expand its activities and diversify its revenues for account for its advantageous location in a dense gas node and access to the pier, which ensures easy export of any products produced at the facility.

"The condition of the plant's Brownfield and available land mass creates opportunities for expansion with a reduction in construction costs and risk. Our recent listing, presented at the NSE, provides access to an expanded pool of capital to stimulate the company's strategic goals. "

He noted that Notore received a permit for financing of $ 37 million. USA to finance its TAM program, including the purchase and installation of backup power supplies and major manufacturing plants.

He said that TAM aims to restore the company's daily production capacity to its production capacity of 1500 tons per year, adding that it is expected that Notore will increase production by about 150,000 tons per year during the current average annual production of 300,000 tons.

Considering the fact that the demand for fertilizers in Nigeria was stable, and Notore was able to sell everything that was produced on-site during the nine-month review period, the company undoubtedly has bright prospects. This is exacerbated by the fact that demand is expected to continue to grow due to the fact that the federal government uses agriculture as one of the key sectors for diversifying the country's economy.

The dynamics for the fertilizer industry remains quite favorable, as about 34 million hectares of arable land in Nigeria annually require at least seven million metric tons of NPK and urea fertilizers. Add to this a fast-growing segment of cash culture with a minimum annual demand for cereal special mixtures at 1.2 million tons at the local level. Equally, fertilizer imports by neighboring West African markets from Nigeria (approximately 500,000 tons per year) are increasing.

To ensure the sustainability of its revenue model, Notore has well-developed and structured commercial opportunities. These include fully automated field sales departments that ensure the complete and accurate creation of demand and meeting the needs of more than 700 local government districts in Nigeria.

In addition, about 40 re-distribution wagons are crossed by more than 2,000 rural farming communities, build folding prints and improve farmers' access to Notore products.

Notore also uses more than 6,000 direct and indirect enhanced service employees built into rural farming communities that raise awareness of agriculture for best practices and inject them into an application to improve fertilizer adoption.

Other commercial opportunities that Notore provides include a network of 58 commercial farms and borrowers that provide 10-15 percent of annual sales, as well as effective cooperation with advanced non-governmental organizations, donor agencies and key government institutions and parastatals to improve economic conditions for small farmers in Nigeria.

Add to this key competitive advantages of the company, such as access to a reliable multi-year gas field just 14 km from the facilities of Notreira, ownership of a private private dock with a direct port status for export and import at its discretion and reasonable / controlled logistics costs.

The company also has the status of a developer of a free zone with appropriate tax incentives specifically for export-oriented enterprises.

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