Notore Eyes Fresh Equity Raise, Bond Issuance, Loan Restructuring

The board of Notore Chemical Industries Plc says it is working on a cocktail of initiatives that would restore it to financial health, meet its various obligations and return to profit which it last reported at the end of the year ended September 30, 2017, when profit after tax stood at N8.716bn, resulting in Earnings Per Share of N5.41 from a revenue of N35.896bn, which also was its highest over the five year period.

At the end of the 15-month period ended December 31, 2021, the company reported a turnover of N25.484bn and net loss of N9.073bn, which translates to a loss per share of N5.63.

Among the initiatives are plans for bond issuance and fresh capital injection, with the appointment of a rating agency, in addition to an application for loans under the Central Bank of Nigeria (CBN) initiative, asides an ongoing discussion with its bankers to further restructure a substantial part of the company’s short-term loans into fixed long-term loans, which when concluded in Q2 2022 as anticipated, will “considerably reduce its finance costs and free up cash flows to augment working capital.”

There is also an application by the management for a N15bn facility under the CBN low-interest COVID19 Intervention Facility programme for the Manufacturing sector, currently being processed with the sponsoring financial institution, expected in 2022Q3, “to refinance a substantial portion of the Company’s more expensive commercial Naira loans to significantly reduce finance costs and augment cash flows.”

Also in the card is the plan for a restructuring of its capital by raising additional equity in Q4 2022, proceeds of which “will be applied to deleverage its balance sheet to achieve an optimal mix of debt and equity and to fund part of planned expansion activities with a view to further re-position the Company for growth, to be followed by a bond issuance programme in Q2 2023, for which discussions are ongoing with a credit rating agency and other financial advisors. “The bond will be used to further reduce and restructure its existing bank debt with a view to reducing finance costs and free up some cash flows for use in augmenting working capital.

Another major step in the journey to profitability, the company explained in the notes, is the successful Turnaround Maintenance (TAM) programme of its fertilizer plant completed during the period, a critical step aimed at addressing the drawbacks affecting its manufacturing plant stability and reliability and to raise production output to meet and sustain its 500,000 MT per annum nameplate design capacity. This is besides increasing its plant production capacity output, operational stability, improve working capital and return to profitability.

The completion of TAM, it noted, would result in a major upturn in production output going forward, which would lead to significant increases in cash flows from operations and strengthen debt service capacity going forward, while also substantial increasing “revenues, a major key to returning the Company to profitability in the on-going financial year.”

Notore Fetilizer plant

To further diversify revenue streams and return to profit, the company says it is taking steps to expand its products offerings, with the production of its Notore NPK blend of fertilizers which continues to ramp up in output and sales with significant increases expected in the ongoing future periods. By leveraging on its installed 2,000 metric tons per day NPK blending capacity, and its successful introduction of the Notore NPK brand of fertilizers into the West African regional market, the company says it is well-positioned for significant growth in revenues and cashflows in the future.

“Additionally, while leveraging the company’s seeds business, robust supply chain and distribution network, the company is expanding further its product offering by going into rice production. The Company has carried out two rice pilot programs as a prelude to its planned launch of Notore rice as a product line in year 2023.

These additional initiatives are expected to further diversify the company’s revenue stream, significantly increase revenues, boost profitability, and contribute significantly to its cashflows.”

The Notore Industrial City Oil & Gas Free Zone, a brownfield industrial location for new projects, because of its access to reliable and abundant natural gas reserves of about 5 trillion standard cubic feet, will apart from attracting financial and fiscal benefits, offers potential businesses in the free trade zone, has the advantage of access to international markets for imports and exports goods through the existing 3,600sqm of Notore jetty dock and its over 2km of shoreline.

Being a licensed independent power producer, Notore already generates electricity for own use, with a total capacity of 59 megawatts and an own use requirement of between 8MW to 13MW, with the excess capacity made available for sale to other industrial off-takers within the free zone.

By leveraging on its Oil and Gas Free Zone Developer Licensee status, the company, through a wholly-owned subsidiary, Notore Power & Infrastructure Limited, is furthering its plan to develop its 560 hectares industrial complex into a gas hub, as part of a gas monetization programme and as an integrated logistics service provider to West African businesses in the entire oil and gas value chain.

The directors firmly believe that after implementing the measures outlined above, there would be significant reduction in its debts, whilst also improving the reliability of the plant, resulting to significant increases in revenue and cashflows, and in the process returning the company to profitability. For this reason, the board is “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 and separate financial statements based on accounting policies applicable to a going concern.”