Alumaco Restructures for Better Performance
By Uche Obike
The recent announcement by the Chairman of Alumaco Plc, Alhaji Shehu A. Musa that the major aspect of the company's on-going restructuring exercise was to expand market share did not surprise market operators who knew the potentials of Alumaco.
The principal activities of the company continued to be the manufacturing and marketing of aluminium products, and the construction and erection of aluminium based building components and allied services.
The company was originally incorporated as a private limited liability company on January 25, 1960. It became a public liability company in July 1972, and had since remained quoted on the Nigerian Stock Exchange.
The company obviously has quality products to market and make profit that could yield increase earnings for the shareholders. But, this was not so in the past few years. Perhaps, that was the reason for embarking on the restructuring exercise which understood has started yielding positive results.
The Chairman in a statement to the shareholders as contained in the company's annual reports and accounts for the year ended December 31, 2003, explained that the company's restructuring exercise had started to yield results as it had now been returned to an irreversible path of profitability.
"A major aspect of the exercise was the need to expand our market share and control costs for the purpose of enhancing margins. This was achieved and efforts are continuing in these directions to further improve profits," he said.
He said that in line with the successes recorded so far with regard to staff optimisation, management was reviewing further strategies to address over all personnel strength and personnel cost.
He noted that specific indices of elements of costs revealed that cost control measures have continued to produce desirable results, while operating costs continued to go down.
He assured that these measures will be enhanced and pursued further in order to boost its profits.
The company achieved a turnover of N339.64 million and profit before tax of N16.856 million, while profit before tax and extra ordinary item stood at N30.02 million, recording 78 per cent increase over year 2002 levels.
The board, according to him, had recommended the payment of scrip dividends. through the declaration of bonus shares on the basis of one new share for every five presently held for allotment to members.
He disclosed that the company was able to weather the operating hardships by an unrelentless marketing drive coupled with existing restructuring and cost control measures that had been embarked upon for a number of years now.
He added that the company had continued to make changes both to reposition itself and to assure its continuing survival.
"With continuing decay in infrastructure notably in the areas of electricity supply and fuel distribution, the cost of doing business escalated for most part of the year, the Apapa area suffered power outages and production had to be run on generators at exorbitant costs due to scarcity of diesel," he said.
Besides, the Chairman explained further that the industry in which Alumaco operated was characterised by very weak entry restrictions as the aluminum product markets were basically people dependent.
In addition to the competition witnessed from these new entrants, the number and spate of abandoned projects have haunted the construction industry, more so the aluminum sub sector that depend on them for survival.
He noted that in view of these scenarios, it was apparent that the company could not operate without recourse to borrowing to meet existing production regimes, at the current exorbitant prices.
The company also was faced with competition in the form of product dumping from foreign manufacturers continue to pose major problems to big producers as the Nigerian players have used this to tremendous advantage.
He assured that the company's future remains very promising as the existing product lines were being reviewed to enable the company concentrate on products that give competitive advantage.
"This has boosted sales significantly in the last couple of months. We believe that with renewed marketing drives and a desire to expand the company's share of the markets as is being done now, the company has returned to a path of continuing profitability," said the Chairman.
The Chairman decried the situation where new projects were initiated, and resorted to wholesale delivery of such contracts to foreign contractors.
"This has worked to the detriment of local manufacturers as foreign contractors who secured such jobs prefer to import the entire elements of the contract into Nigeria," he said.
He added that government was to determine how and when to resolve the issue of unpaid domestic debts owed to contractors which today stood well in excess of N1.3 trillion.
The Chairman assured that the company had been able to compete effectively for jobs within this category by an unrelenting pursuit of product innovation to suit the needs and dictates of customers, as well as cost control strategies that continue to ensure the delivery of cost effective and cheaper products, and by pursuing the marketing of products that give Alumaco the competitive edge.
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