Unclaimed dividend ’ll be resolved through information flow, says Jaiyeola, MD, Honeywell Plc

By OMODELE ADIGUN

Lanre Jaiyeola

Unclaimed dividends, currently believed  to hover around N20billion, continue to be albatross to the capital market stakeholders year in, year out. To Mr.Lanre Jaiyeola, the Managing Director/CEO of Honeywell Flour mills Plc,the matter can be resolved via information flow from investors.According to him, regular change of address by shareholders without duly informing the companies contribute a great deal to the problem.

Jaiyeola, who praised the efforts of Nigerian Stock Exchange in revitalizing the market , believes that companies should encourage payment of dividends into shareholders account, saying that if these are put in place, the level of unclaimed dividends will drop.

In this interview, he speaks on diverse issues affecting the manufacturing sector and how the company’s people-focused vision has helped it to surmount various challenges in the harsh investment environment in Nigeria today. Excerpts:

Performance

Given the business environment in which we operated in the past twelve months which ended March 2014, I want to say that it has been very tough. We were confronted with a lot of challenges which are related to heightened competition among players in the industry.  There is intense competition in the manufacturing landscape, especially in the sub-sector were we operate, but we are focused, purposeful and with a committed workforce, we are up to the task.

Our number one competitive tool is the quality of our products, on which we don’t compromise. We shall continue to remain number one in terms product quality.

It is also important to note that the key drivers of our superlative performance are our people, staff, board and management. We are driven by the vision of the company, which is to be the most admired African company in terms of our people, practices and successes. We are driven by our core values of responsibility, integrity, courage, excellence and respect for people.

Brands

We play in five categories: our flagship brand is Honeywell Superfine Flour, it is number  two  in the market with about 20 – 22 per cent of the market share; Honeywell Semolina  accounts for 40 per cent;  Honeywell Wheat Meal, 60per cent; Honeywell Noodles,  12 per cent  and Honeywell Pasta,14 per  cent. Sometimes our market share is just a reflection of our limited capacity and not a true reflection of the consumers’ preference for our brands. We have exhausted the current capacity for some of our products and as we build more capacity, we will continue to increase our market share.

In 2013, Honeywell unveiled a N10 billion flour mills. how has that increased capacity impacted on your brands in the marketplace?

You are right. In 2013, we increased production capacity by adding 1,000 metric tonnes flour mill in two tranches of 500 metric tons each. That expansion greatly impacted positively on our brands. Before now, we had attained our peak production capacity for Honeywell Semolina but with that expansion, we were able to churn out more for our teeming consumers. In addition, we were also able to produce more Honeywell Superfine Flour and Honeywell Wheat Meal. The implication of all these is that we were able to satisfy the demand of our teeming consumers and also able to grow the business more in years to come.

Expansion plans

Yes, in fact that is the medium to long term plan of the business, to have a one stop shop. We are expanding by investing in a 63 hectares of land in Shagamu, Ogun State. The implication of that is that we will be in a position to expand across all the products that we offer the market. We are increasing pasta and flour mill production capacity while also investing in a feed mill.

Jaiyeola

Unclaimed dividend

 This is a worrisome trend in the capital market.If you look at the reports of many companies, the rate at which the list of unclaimed dividends grows is sometimes alarming. I think the regulatory authorities need to enforce a mandatory awareness campaign by quoted companies on dividend claims so that shareholders and investors can benefit from their investments. We have also observed that information flow from investors to the companies is sometimes faulty.  Therefore, it is pertinent for companies to ensure that from time to time, shareholders addresses are revalidated. Though the trend now is e-dividend, companies should as much as possible encourage payment of dividends into shareholders account.  I believe if all of these are put in place the level of unclaimed dividends will drop.

At Honeywell Flour Mills, we strive to ensure that our shareholders are informed periodically on unclaimed dividends, we make announcements at Annual General Meetings. This year, we are going to make a publication, listing out names of such shareholders who have their dividends unclaimed. This is part of our contributions towards eradicating the menace of unclaimed dividends.

You advertise heavily during football matches, does it have any correlation to your target

Yes it does. If you look at the profile of our core consumers, they are children, youths and young adults and football is one unifying factor in Nigeria, we believe that football is one platform that can offer the level of awareness that we want to associate our brands with. So, it’s an opportunity for us to connect with all our core consumers not only children, but adults and even the very old one’s that enjoy watching football.

Taxation

Taxation in Nigeria has never been better managed as it is now.We are now in a situation where the contribution of taxation or the relative relationship of taxation to the GDP is much higher than what used to obtain. But even at that, when you compare the ratio of taxation to GDP, it falls short. I think the last tax to GDP ratio was 12 per cent. However, before the rebasing, it was 20 per cent. Compared to a tax ratio of 30 per cent, this means that tax management system needs to be strengthened. However, in terms of administration, I think the tax authorities are doing well. As good corporate citizens, we are subject to paying tax as established by the regulatory authorities.So it is normal for us that there must be taxation in business.The least we can do is to comply and pay whatever tax that is established for us.

Unstable power

Energy in manufacturing is very critical. Unfortunately, we have not derived much benefit from the national grid. Since we started this business about 19 years ago, we have always run on self-generated power supply. Today, we have a combined 30MW of self-generated power supply, comprising 15MW gas power plant and a back up of another 15MW diesel power plant. So, you can appreciate the cost implication of running a manufacturing business in our environment. Because of the nature of the processes we run in our business, it is almost impossible for us to depend on power from the national grid.  It is a heavy cost, which is avoidable and we are looking forward to that day when manufacturers will have to depend on the power from the national grid to run their business.

What is your assessment of the capital market in Nigeria today?

It is very unfortunate that we experienced a collapse in the Nigerian capital market about seven years ago. Although, it was not only a Nigerian thing, but a global phenomenon. That said, the efforts of Nigerian Stock Exchange at revitalizing the market is highly commendable in the sense that investors’ confidence is gradually being boosted again; the apathy to investing in new issues is gradually going off. Soon, investors’ interest will be fully activated and the capital market will boom again.

For Honeywell Flour Mills, we believe that our share pricing will be better than it is at present. The problem is that most Nigerians want to invest today and get instant returns and where that is not coming, they tend to sell off and create panic in the market. Honeywell is committed to building the wealth of shareholders not only today but for the future. In years to come, all the efforts we are putting in place today will achieve tangible results for our shareholders. So, for an investor who has interest in long term returns on his investment, we believe very strongly that Honeywell Flour Mills is where to focus on.

Interest rate

The interest rate in Nigeria is among the highest in the world. Unlike Europe and America whose interest rates hover around 1 or 2 per cent, we operate an interest regime of over 15 per cent. After the recent rebasing, the manufacturing sector accounted for only 7 per cent of the GDP. The implication is that government needs to focus more on the real sector because that is the heart of the economy; that is where we can generate foreign exchange, bring about food security and generate employment for the Nigerian people. We are very hopeful that the Federal Government can do more to help the central bank in its efforts to bring down the interest rate.

Cassava initiative

The cassava initiative is a welcome development and we at Honeywell Flour Mills will constantly support government policies that will help grow the economy. In demonstration of this, we have invested almost N1 billion in modifying our plants to add high quality cassava flour to the composite flour that we produce today. More than ever before, the Federal Government has created a stronger bonding between players in the flour milling industry and the Ministry of Agriculture. We are working together in ensuring that the policy is properly articulated when it comes into effect and that it can work in the overall interest of Nigeria and Nigerians. We are presently working in a committee set up by the Ministry of Agriculture, to look at the details of the policy and in a couple of weeks, this will be made public.

What is the next big idea brewing at Honeywell?

The next big idea from Honeywell is that we are presently embarking on a major expansion programme in Sagamu, Ogun State. We are investing in a 63 hectare-land that will enable us expand and increase capacity across all our existing products. At this location, we plan to literally blow up the business. We are increasing our capacity for pasta, flour and investing in a feed mill. We plan to expand our flour milling capacity by another 500 metric tonnes per day, expand pasta by about 150 per cent of what is currently in place now. We are investing in feed mill operation in an effort geared towards focusing on locally available raw materials. For us, it is another way of building value for our shareholders. Most of these projects will be in place in another 18 months and commercial production will start which will enable us not only to increase our top line but also increase our bottomline and offer better returns to our shareholders.