“Intrinsic values of our Products stand us Out” – Vitafoam Boss

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“Intrinsic values of our Products stand us Out” – Vitafoam Boss

 

In this engaging interview, the Group Managing Director, Vitafoam Nigeria Plc.,MR TAIWO ADENIYI, discusses a range of challenges militating against the operations Nigerian manufacturers and how the Company has been navigating the slippery terrain to sustain shareholder value.

 As Nigerians are warming up for the Presidential election, which  areas would you like the incoming Administration to address in order to enhance the  manufacturers’ output?

Rightly,  as you have said, the elections will be done very soon. We have started engaging the government and hopefully?  they will make use of all of our engagements. Top on the list of what we are asking Government to attend to is the dichotomy among the various Forex windows that we have. We are expecting them to bring in economists to be able to look at the impact of the various decisions as regards Forex on the economy, rather than an individual just putting whatever it is. Another issue  is Insecurity. Everybody loves to carry out his businesses in a safe environment. Many of us have factories all over the nation. We produce in some places  and want to move it to another place, and it has become extremely difficult.  Drivers now tell you that you cannot go to a certain place and those that are ready to go are charging above the roof, and this is making all of the cost elements go up from time to time. Energy is another challenge. Infact, if we do a combination of these three elements, you’d find out that if you cast your mind back to what has helped the nation to continue to be a nation, this three elements form the base. The question we keep asking ourselves as manufacturers is that what has been the benefit of the privatization of the energy sector? Domestic people might say they are benefiting from it but in terms of industrial, we have not benefited so much from it. You’ll now find out that the cost of the challenges is high. Long before now, subsidy has been removed on Diesel and we have been coping with our lives. But because of the pressure on Forex, Diesel has gone up again. We started the last financial year of Diesel price of 360 Naira. Infact it went up to that. It used to be above 200, even 192 Naira at a time. All of a sudden, it went from 192 to 250 and we thought that was it. From 250 it went to 360, now it is 800-1000 Naira. You  can imagine that you are already in the financial year and you have all of these costs  skyrocketing. Infrastructure is the language of the day. We all talk about infrastructure, that if Government can provide  and there are ways. If they involve the Private sector by way of Public- Private Partnership (PPP). I’m sure there will be a lot more participation, because at the end of the day it is good for all. But what you find is that we don’t even trust the government. Today you’ll go and you’d be told that if you fix Oba Akran road, you are going to take tax holiday. The day I’ll apply that paper of tax holiday, woe betide you if people that made law at the time you were signing that contract document have been out of office. You will start all over. It is then someone will tell you that it was corruption when  they were signing the document and that is why you got away with it, saying you must have bribed. At the end of the day who suffers it when two Elephants fight? So that is why Private Sector are now reconsidering their involvement in all these PPP arrangement, because you find out that there is not trust. Somebody will just come and break the trust after you have signed all documents amicably and everybody has agreed. That is why we have the deficit we have in our infrastructure. Look at Oba Akran, the road has been like this for a long time. Are we saying the same number of cars still ply that road? No. What are the alternative roads? No alternative roads. It is this same Oba Akran. Anytime Ikeja exchange or other places are blocked, it is Oba Akran. Look at the Ashade end of it, the road is so bad. Why won’t it be fixed so that you can remove the pressure on Oba Akran? So you find all of these deficit in infrastructure all over the place and it is making it so impossible to run business around here. Cost is just skyrocketing by the day and it is what you buy that you sell.

You have listed out many factors impeding your operations. Can you shed more light on the Forex? This is something that has lingered over the years. How do you want the government to tackle this issue for the manufacturing sector?

BOI gives loan to manufacturers. They do it quite excellently. When BOI started giving out loan, I remember very well, when for instance Vitafoam got loan from BOI. One of the things BOI used to do then was making a list of your Forex requirements to CBN. Then CBN would grant a window to genuine manufacturers. This is because they know that when you are able to do that, when you are able to source your materials cheaply to bring to this environment, you create job opportunities and expand the horizon. So what we are asking government to do, I may not be absolutely correct but the Forex element of the House of Assembly has never failed one day of getting allowances to them. But I can imagine that there is a special window that ensures that. The same thing with the judges, I may not be too correct, but I can imagine that nobody is shouting from there as we are shouting in the industry. They are not shouting and saying CBN has not paid us our allowances that is dollarized. So why won’t government create a special wondow where genuine manufacturers can access Forex. You know them, you can appraise them, you can do a benchmark and say that if a volume of business is done from the books that you see, you have everything to use to measure and know whether the business is genuine. So create a window where there is access to Forex. I always say that in the wisdom of the fathers of this country, and the current government, they invested heavily in Agriculture. What were we supposed to do to allow that Forex comes back to this environment? But  who measures that window? Who is it that monitor that  if I, as an Agricultural investor , take out 20 tons of Garlic and I sell and I get 20 dollar. Do I bring 20 dollar back to this environment? Even when I bring the 20 dollar back, how do I sell the 20 dollar? That 20 dollar is what is supposed to be available at CBN to redistribute back into the economy but it is not happening. Special vehicle windows can be created for industrialists, for manufacturer, to be able to have access to the Forex to operate their business.

You have talked about all these headwinds. How is it that Vitafoam is making profit and your subsidiaries are thriving? What are you doing differently in your operating environment?

 Well, if there is anything Vitafoam is doing differently. You may see two products looking so much alike in the market, but you ask yourself why they don’t cost the same price. There are intrinsic values we have in our products that standus out. We say to ourselves that our definition for quality is fit for purpose. For as long as our products fit the purpose for which you are going to the market to spend your money, you will continue to buy it. If you go to the market and say you want to eat Agoyin beans, and you find the beans and it is sweet, is it the price you will first ask for? No. That you find it will first give you satisfaction. So what we have done is to create a niche market for ourselves. We don’t play in every market. We don’t run at the same pace with others. We have created a niche market for ourselves to say look, when you buy our products you will not regret spending your money. This is what is standing us out in the market place. We produce well and we price well.

In the 2022 finacial year, the grouo declared 31% topline increase, 2% decline in profit. How will describe the group’s performance despite the challenging environment?

 The thing you must understand, like I explained earlier. We started the year on 192 Naira per litre of Diesel. If you go and look at the administrative cost and the elements that contributed to that drop, you will find it under the likes of electricity and maintenance. When I say electricity, Tariff went up in the course of the year, same as Diesel price. Also, you’ll find maintenance of machines. Those machines are not made here, so the same dollar you are struggling to get to but your raw materials is the same dollar you are applying to the buying of the spare part for those machines; to fix the machines and get it running. So when you do a combination of all those items, that is what is responsible. I will say that in fairness, we didn’t plan for it. However, if you look at the exchange loss alone in that financial year, we lost over a Billion Naira to exchange difference that should directly have gone to profit. If we really have serious government, it should be of concern to them. If Vitafoam, as small as we are, lost over a Billion Naira that should have gone to shareholders, they should be concerned. A percentage of it, 31% of a billion should have gone to the government too. That is over 300 million Naira. So that is what is responsible for what we have reported.

Is Vitafoam tapping into  The African Continental Free Trade Agreement  (AfTCA) to boost its income generation ?

We have signed that agreement without looking at the nuts that brings it together. We already signed because we didn’t want other countries to go ahead. Truth be told, as I speak with you,  we are still trying to sort out the tariff elements. How do you treat origin of goods from African countries? These are details that are still being worked out. All of those companies you say are benefiting from  have an offshore business. So basically,  what they are doing is moving from the shores of Nigeria to the market. But what we are talking about is market trading. There is  exchange of goods between those offshore businesses and their country of origin. We have signed though, we are not left out.

About three days ago, a renowned economist said that manufacturers pay 74 different taxes in Nigeria. This boils down to Multiple Taxation. What is your reaction to this?

Thank God an expert has spoken. What we have done as organized private sector is that we have decided to put our problems in pocket. We have earlier listed the germane headwinds. If I had continued, I would have gotten to Multiple Taxation. The question we have been asking is what is the Joint Tax Board doing? I’m sure we have people who go to work everyday, that are supposed to be looking at these tax heads and be asking how we can harmonize the various taxes. But nobody is doing that. We have shouted and complained but nothing still. We are like toothless bulldogs just barking but nothing comes out of it. We don’t park outside the premises anymore because we were asked to pay a separate tax for it. We were even told we would pay for the number of cars parked within our premises. We are charged all manners of taxes. We can only continue to engage them.

 Looking at the operations of Vitafoam and the subsidiaries. How is the business fairing?

The new baby to the group is the Vitaparts Nigeria Limited. Its operation has  just started and good enough we are making some sales already. As it is with all start ups,it is coming up and getting better by the day. We are hoping that this  particular year, the new subsidiary will  contribute significantly to the group figure. But it has started doing well now and it is gaining acceptance among people. Government should just help by protecting manufacturers, stopping the inflow of products that can be manufactured here.

Which areas of the company’s operations would you prefer more improvement?

We will keep improving. We are not there yet because we are also careful about the environment we operate. You don’t want to produce a product that nobody will buy. But gradually as we see that the product has attained some level of acceptability  in the market, we will move it up again. Bearing in mind that as we move up also, cost will move up and we want to be sure that people will still buy it. So we are daily looking at our products for areas of improvement and areas where we can save cost. It is not every time the cost should go up. We can actually save cost in some areas. We can automate some of the processes and save cost and have better margins on our products. Innovation cost or what we call research and development costs a lot of money. But in the long run, the money you spend on research and development is a sunk-cost. But you will regain it down the line. But one thing we do is that we regularly send our product managers to  anywhere in the world to go and learn new thing. We have our Research and Development team that appraises our product every now and then,  to come up with improvements. We send them on conferences and trainings and they come back to implement the things they have seen there and that immediately translates to savings in our cost of operations. Every year,  we give ourselves a target that we cannot report the same cost of operations. Forget about the fact that cost of sales might go up but the element of cost of operations in that has to reduce. That is the eay we measure the performance of the technical team. That also cuts across a number of other units where we are always checking to be sure that everybody is not draining the purse.

What are you doing in terms of sourcing your materials locally?

 The materials we use are byproducts of petrochemicals. Unless and when our petrochemical industry runs in this country, there is no alternative. There is no individual that will go and invest in setting up a petrochemical company. This is why we still import a lot of those materials. The natural rubber that we used to use cannot be sufficient for production and the price will be way over the roof.

Recently, Vitafoam donated some blocks of classrooms to United Anglican Primary School in Ondo state. It seems the company is placing more premium on education in its CSR policy. What is your reaction to this?

Our CSR cuts across. We focus on education, health and community development among others. The reason why we are paying more attention to education is you find out that if you educate a child, there is every possibility that you have saved the community. We have decided that as a board, if you educate a child it’s like putting a light in the family. If you have 100 candles and you are able to light one, there is every chance that that one candle will light the remaining 99. So our philosophy is to educate even if it is just one child per family. If these children are educated, it will be difficult to coerce them to partake in vices. This is why we are investing in education.

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