Africa’s leading chemical and agro-allied company, Notore Chemical Industries Plc, has announced the commencement of the Turn Around Maintenance (“TAM”) of its plant.
A disclosure sent to the Nigerian Stock Exchange said that the TAM is aimed at returning the company’s operating plant to its 1,500 metric tonnes per day (MTPD) and 500,000 million tonnes per annum (MTPA) nameplate production capacity. It will also increase the reliability index from the current level of 67 per cent to 95 per cent, the company added.
The exercise followed the drawdown of a N13.3 billion loan facility from African Export-Import Bank (“Afrexim”) for the implementation of the TAM, the company said, adding that it has started ordering all key components for the TAM.
“The TAM project will include the procurement of critical spares required to sustain the nameplate capacity of the Plant and installation of a back-up power supply to the current Gas Turbine Generator,” the disclosure said. “Upon procurement of all the key components and critical spares required, the objective is to accomplish the maintenance activities within a period of 30-days production to production.”
PREMIUM TIMES reports that the company had said that the TAM would reduce downtime at the plant, boost production and increase revenue. It added that the facility drawn from Afreximbank would be used for orders of critical components of its plant for the TAM to ensure optimal performance.
According to the details of its annual account made public last September, the group and company had recorded net losses of N5.75 billion and N5.68 billion respectively during the year ended September 30, 2019 and the net current liabilities as of that date were N37.03 billion and N37.71 billion, respectively.
The company said at the time that the developments indicated that a material uncertainty existed that may cast significant doubt on the group and company’s ability to continue as a going concern. The company might also be unable to realise its assets and discharge its liabilities, it said.
As part of measures to return the group and the company to profitability and improve working capital, the management said it would embark on a Turn Around Maintenance (TAM) of its production plant and equipment to improve its reliability and increase production output. The TAM programme, it said at the time, would be funded by a seven year tenured loan of $37 million to be obtained from the African Export-Import Bank.
“Notore has commenced its TAM program,” the company said in the statement at the weekend. “The ₦13.32 billion facility granted by Afreximbank has been drawn down and orders placed for critical components.
The TAM program is expected to be completed by FYE 2020. The completion of the TAM program will ensure the Plant operates at its nameplate capacity resulting in a consistent and significant improvement in production numbers and revenue.“
The company added that to the extent that its operating costs are largely fixed, it is expected that a significant amount of the upside from the increase in revenue post TAM will flow to the bottom line.
The company’s operating cost in 2019 was put at ₦ 24.5 billion and ₦ 24.0 billion was its cost in 2018.
The company said the Nigerian government’s policies were favourable for its business, and would boost its revenues when its new NPK blending plant comes on stream this year.
“The current Federal Government policies in the fertilizer space are quite favourable to Notore’s business. Additionally, on-going market demand for NPK and NPK specialty blends will boost the business’ revenues when Notore’s newly installed and commissioned 2,000 MTD NPK blending plant begins its inaugural production in FY 2020,” it noted.
The company, however, disclosed that it has begun gradual efforts to further diversify its revenue streams by selling specifically produced Notore seeds to farmers.
“Notore’s greatest challenge to its PAT remains its Net Finance Cost,” it said, adding that aside the TAM initiative which will be completed in FY 2020 to introduce reliability into Notore’s Plant, the group is working on various other initiatives for FY 2020 to bring the company to profitability by considerably reducing its finance cost and improve its working capital.
Checks by PREMIUM TIMES showed that the company’s finance cost in 2018 was put at N12,759,613,000 while that of 2019 rose to N13,669,001,000. In terms of its working capital, checks showed that the company’s increase in inventory in 2019 rose to N2,901,873,000 from N99,011,000 in 2018.
Notore Chemical Industries Plc was incorporated in Nigeria on November 30, 2005, as a private limited liability company, and is domiciled in Nigeria. Its registered office address is Notore Industrial Complex, Onne, River State, Nigeria. On June 13, 2014, the company was re-registered as a public limited liability company and was listed on the Main Board of the Nigerian Stock Exchange on August 2, 2018.