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Shoprite’s profit flag creates ‘perfect storm’

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Shoprite’s shares yesterday tumbled to their worst in nearly 20 years on the JSE, dragging food retail stocks and the All Share Index down. Photo: Oupa Mokoena/African News Agency (ANA)

DURBAN – Shoprite’s shares yesterday tumbled to their worst in nearly 20 years on the JSE, dragging food retail stocks and the All Share Index down after Africa’s biggest grocer flagged that its profits during the six months to end December could fall by as much as 26 percent.

The news, which came after the JSE stopped trading late on Tuesday,  sent the market into a tailspin yesterday. Ron Klipin, a senior analyst at Cratos Capital, said the weak trading update took the market by surprise and the statement became a perfect storm encompassing factors such as food deflation affecting 10 719 items in basic foods.

Shoprite fell 15 percent, the worst since July 1999 as the group blamed low food inflation and a drop in currency earnings for the subdued outlook. It also said lower gross margins, stock shortages and weak trading conditions hammered its performance, driving its stock to R151.53 a share in morning trade. It closed 14.21 percent lower at R153.13.

The rout extended to Pick n Pay, which fell 3.07 percent to R68.50, Woolworths, which slid 3.35 percent to R49.27 and the Spar Group, which eased 2.82 percent to R195.11. The all share ended down 0.47percent, while the retailers general index shed 2.63 percent.

Jordan Weir, a trader at Citadel, said the negative sentiment was directly related to Tuesday’s notice to shareholders that the company faced headwinds during the period.

“According to the SENS announcement, the main reasons for the sharp decline in the company’s profits included the use of new financial reporting standards, which may have had a negative impact on the final presentation of its underlying numbers,” Weir said. The firm also fell on cost and depreciation increases, as well as weak turnover numbers and lost sales resulting from the implementation of a new IT system, which had negatively impacted the flow of supply, he said.

“All in all, the decline in the group’s profits demonstrates again that the South African consumer has remained under extreme financial pressure in a challenging economy, and that the consumer is thinking twice before spending unnecessary money is becoming the norm,” Weir said.

Klipin said food deflation had hurt trading margins as the group had a large share in the lower LSM markets, while currency fluctuations in the continent and hyper-inflation in Angola weighed on the results.  “These factors were beyond the control of the group, which is a large player in the African food market, and is not necessarily a recurring item.

“The other side of the coin was factors such as strikes, IT challenges and the new logistics operation in Gauteng,” Klipin said. However, he said the year ahead should result in many of the problems facing Shoprite, with its strong brand, being overcome. “The likelihood of food inflation later this year should also help turn their fortunes around,” Klipin said.

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Press Release

Pernod Ricard’s CEO for Africa & Middle East Visits Nigeria, Reinforcing Market Commitment

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Pernod Ricard’s Africa and Middle East CEO, Selçuk Tümay (center), with Pernod Ricard Nigeria Management Team, MD, Pernod Ricard Africa and CFO, Pernod Ricard Africa and Middle East, Nevzat Akkız, during the recent visit of Selçuk Tümay to Pernod Ricard Nigeria (Photo: Supplied).

Pernod Ricard, the world’s second-largest wine and spirits company, reaffirmed its dedication to Nigeria’s thriving market through a recent visit by Africa and Middle East CEO, Selcuk Tumay, accompanied by Chief Financial Officer Africa, Nevzat Akkiz, and Managing Director Africa, Sola Oke.

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The visit began with a business review at Pernod Ricard’s Lagos office, assessing regional performance and strategic planning.  A “Meet and Greet” session recognized local employees’ talents, fostering conviviality.

An immersion into Nigeria’s vibrant retail landscape followed with an open market visit to Oke-Arin Market, guiding discussions on adapting marketing strategies. Retail partnerships were reinforced by visits to top stores, enhancing in-store experiences.  At night-time, On-trade visits showcased Pernod Ricard’s premium offerings.  The Key Distributors were not left out during the visits. These visits underscored collaborative relationships for a brighter future.

Selcuk Tumay stated, “Despite Nigeria’s complexities, especially foreign exchange volatility, we are optimistic. Adapting strategies will drive growth, support local partners and deliver exceptional consumer experiences.”

Building on success in Turkey and the Middle East, where innovative marketing and strategic partnerships fuelled double-digit growth, Pernod Ricard applies these learnings to Nigeria.

“We can leverage Turkey’s and the Middle East’s successes and best practices to navigate Nigeria’s challenges and unlock opportunities,” added Selcuk.

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AFEX Release 2024 Crop Production Report, Forecasting A Decline In Commodity Production Levels

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L-R: Ify Umunna, Head, Strategy, AFEX, Dr. Audu Grema, Senior Programme Officer, Agriculture, Nigeria, Gates Foundation, Khadija Othman, Lead, Production Pillar, PFSCU, Ade Adefeko, Director, Corporate & Regulatory Affairs, Olam, Esiri Ojo, Senior TA on Coordination and Special Projects, Office of the Statistician General, NBS (Photo: AFEX)

Africa’s leading commodities player, AFEX, launched its 2024 Wet Season Crop Production report at a hybrid event held at their Abuja office on the 31st of October. The report provides key insights into the underlying factors influencing the commodities landscape such as production levels, price performance and market outlook for the coming season. This year marks a significant milestone as AFEX expands its research to include Kenya asides just Nigeria, providing critical intel into the agricultural sectors of both nations across key commodities value chains such as Maize, Paddy rice, Soybean, Sesame, Ginger, Cocoa and Sorghum. The report features data gathered from over 51,000 farmers across Nigeria and key producing counties in Kenya. It provides the agriculture ecosystem and key stakeholders with reliable intel as a guide for policy development and data-driven trading decisions.  

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The Nigeria Report reveals huge agricultural potential for the nation that unfortunately, remains largely untapped by producers struggling to keep up with growing demands. This is owing to factors such as high cost of inputs, lack of financing, growing climate change concerns across dry spells and harsh rainfalls, pest infestation amongst other concerns.  Amidst the general downward trend in commodity production, commodities such as sorghum, ginger, cocoa and sesame, however, present an upward trend primarily due to expanded cultivation and strong recovery and response efforts to last year’s price surges.

On the other hand, the Kenya agricultural sector remains reliant on rainfed farming, with average farm sizes ranging from 0.2 to 3 hectares, this heavily impacts on the production levels falling below potential. Challenges such as inadequate infrastructure, insufficient investment, post-harvest losses, and climate change continue to impede progress in enhancing local production. This decline, coupled with Kenya’s significant reliance on imports, poses a significant threat to national food security, highlighting the need for targeted intervention to enhance local production.

Paddy rice, a key dietary staple in Nigeria is projected to decrease by 2.6%, resulting in a total output of approximately 8.1 million metric tons. This decline is primarily driven by the high cost of fertilizers, leading to reduced yields while prompting many farmers to shift to alternative crops like sesame and sorghum that require less fertilizer and are more cost-effective to cultivate. Additionally, widespread insecurity in major rice-producing states have disrupted farming activities, with severe flooding in several regions further compounding the issue. As a result of these factors, the availability and price of paddy rice is expected to be significantly affected in the coming year, raising concerns about food security and affordability for consumers across the country.

Kenya is also set to see a modest decline in maize production by 1% due to decreased fertilizer usage as input prices increase. Amidst numerous government interventions, the nation is yet to receive yields but maize prices have experienced a 29% decline, primarily driven by sustained imports from neighboring countries, which offset anticipated yield gains. This has led to concerns around even reduced output by local farmers in the coming season. Nigeria on the other hand has similar trends with maize production set to decline by 5.6% attributed to a reduction in cultivated land due to rising costs, limited fertilizer usage, and adverse climatic conditions expected to negatively impact crop yields. Consequently, maize prices are expected to surge significantly during the 2024/2025 season, impacting both farmers and consumers.

Overall, commodity pricing trends in Nigeria and Kenya reveal significant variations both influenced by production challenges and market dynamics. In Nigeria, the report forecasts a notable increase in ginger prices by over 90% due to heightened demand and lingering effects of the fungal attack from last season. Both reports underscore the urgent need for policy development aimed at enhancing agricultural productivity and food security as well as increased investment into agro-processing and infrastructure to mitigate these challenges.

Speaking at the launch event, President/CEO of AFEX Nigeria, Akinyinka Akintunde, stated, “each year, we conduct this extensive survey involving over 40,000 farmers to gain deeper insights into the challenges facing our agricultural sector. The findings of the survey underscore the urgent need for targeted interventions to enhance productivity, particularly in staples like maize and rice. More importantly, the report helps us see the critical areas that need intervention and that is a plus. By addressing critical issues such as access to quality inputs, climate resilience, and market stability, we can significantly improve food security and empower our farmers, ultimately driving economic growth and sustainability in Nigeria.”

The report is now available for download on afex.africa.

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Bamidele Adewole on closing the housing gap and real estate investment in Nigeria

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Bamidele Adewole is a seasoned finance expert and entrepreneur with a passion for real estate investment, financial advisory, and business development. With a proven track record of success, Bamidele has been instrumental in executing multi-million dollar transactions and advising a growing client base on wealth management and investment strategies. As a thought leader in the financial industry, Bamidele has authored several insightful reports, facilitated numerous seminars and webinars, and published a book, “The Smart Investor’s Guidebook” in 2020. In this exclusive interview with Alaba Ayinuola of Business Africa Online (BAO), Bamidele shares his inspiration for venturing into real estate as a financial and investment professional and the housing gap problem his company, PWAN STAR is solving. Excerpts.

 

 

Alaba: Could you tell us about PWAN STARS and your strategic role at the company?

Bamidele: The Company was set up with one primary objective- to reduce the housing gap in the country. We noticed that there was, and still is, a big challenge with accommodation in Nigeria and we decided to put our heads together, set up a business that would contribute in its own little way towards the reduction of this gap. This we are doing gradually as we currently have almost 100 housing units either developed or at various stages in the development process. Our plan is to have at least 7 to 10 building projects consisting of hundreds of units within our portfolio by the end of 2025.

My role as CEO in the company is simple. I am there to provide general guidance to the company and drive its vision which is to help make the dreams of Nigerians to own their own homes a reality. More specifically speaking, my role covers areas around strategy, product conceptualization, business development and risk management. I also oversee the finance and projects functions. It is my responsibility to ensure that we manage our finances optimally without endue exposure to financial liabilities and similar risks. I also work closely with the technical team in our projects department to coordinate the work of our vendors, artisans, contractors and the likes with the aim of delivering our projects within time and budget benchmarks.

 

Alaba: What sets your company apart from competitors in the industry?

Bamidele: What set us apart in my own view is our approach to business. We don’t believe in making too much noise or in using hype as a strategy to market our products. We prefer to drive our growth organically through risk management practices as well as product quality and customer service excellence. We don’t just sell products to our clients; we give them a memorable experience – one that would make them almost feel obliged to come back to do more business with us or at least refer us to their networks. We are building a niche for ourselves within the industry as one that does not compromise on standards and ethical considerations. We understand that our clients make sacrifices by investing with us and we do not take this for granted at all. I believe this strategy sets us apart, as many other players in the industry prefer to do things differently.

 

Alaba: Can you share a notable PWAN STARS achievement or success story?

Bamidele: One notable achievement to point to is our recent completion of a 12-unit apartment block located within the Ajayi Apata New Town, Sangotedo, called The Edifice Apartments. The property includes a fully equipped gymnasium, ample parking space, high speed fibre-optic internet cabling, treated water supply, a children’s playground, automated sewage management, good drainage and road network, horticulture, amongst others. It’s a fully serviced development with services such as cleaning, gardening, fumigation, internet provision, uniformed security, waste disposal and a dedicated customer service support team. We are very proud of this project and the fact that we were able to deliver it within a relatively short period of time, despite the economic headwinds we faced during construction.

 

Alaba: How is technology transforming the real estate industry, and how is your company adapting?

Bamidele: Technology is a big thing across all industries, and real estate is certainly not an exception. Technology is at the very heart of almost everything we do. From our construction methods, techniques and tools, to our interior finishing, infrastructure developments, provision of amenities and so on, we make sure we continually find ways to do things better and more efficiently through the use of technology. We are also driven by the need to make our customer experience more memorable by providing them with cutting edge options driven by technological ideas. 

 

Alaba: What trends do you see shaping the real estate market in Nigeria?

Bamidele: I see a greater role being played by technology. We are already in the era of smart home automation and I see it becoming more of a standard feature in housing developments, especially within the middle-class segment and potentially lower segment. I also expect to see more emphasis on the provision of green energy solutions as more developers are beginning to embrace sustainability practices in their developments. The awareness is growing amongst both developers and would-be homeowners. I expect that a time would come when building a residential property without including these features would be regarded as “old fashioned” and outdated. We are already incorporating these technologies and features into our developments, so we are well positioned and ready for the future that lies ahead.

 

Alaba: What inspired you to transition into real estate full time?

Bamidele: The major inspiration for my venturing into real estate was the desire to contribute as much as I could to solving a national problem. I knew I would never be able to do this alone, but I felt that if I played my role, it would help in some way, no matter how small. Also, as a finance and investment professional, real estate being a viable asset class, aligned with my background and training. It wasn’t so much about the financial rewards for me, even though that is important, but the fact that I felt it was something that would allow me make a difference to people by developing and promoting a product that could lead to financial empowerment and long-term wealth creation. 

Alaba: What’s one thing you wish people understood about real estate investment?

Bamidele: The major knowledge gap I see regarding real estate investment has to do with the expectation for short term returns. Some people see real estate investment as a scheme where you can invest and start to generate good returns immediately after. All investments require patience, but real estate requires even more patience as the real returns take time to manifest. I would say one should give at least 3 to 5 years to begin to derive the optimal rewards for investing in properties. This does not mean that one cannot generate returns within a shorter period; what it simply means is that on average, most property investments take time to deliver good returns. With good risk management practices, working with a reliable developer and a patient mindset, real estate investors can make a good and sustainable fortune on their investments over time. 

 

Alaba: Lastly, What advice would you give to aspiring real estate professionals?

Bamidele: My advice to them is not to get involved until they fully understand what it takes to survive and thrive in the industry. Because we have a “free entry, free exit” system in the country, there are so many developers who come in unprepared, get their fingers burnt, and aren’t able to cope with the demands and challenges they face. While having financial resources is not an absolute must, it is important that one at least understands how to raise funding for their business, as real estate is highly capital intensive. Many developers therefore struggle to make meaningful impact due to lack of funding and lack of understanding of how to raise funding for projects. Beyond this, there’s also the technical aspects of property business which is often overlooked by many real estate entrepreneurs.  I believe every aspiring developer should have a mentor or role model to help improve the quality of their decision making and ensure they don’t make the same mistakes that others before them made. As the popular saying goes, they should “look before they leap”.

 

BIOGRAPHY 

Bamidele Adewole is a seasoned finance expert and entrepreneur with a passion for real estate investment, financial advisory, and business development. With a proven track record of success, Bamidele has been instrumental in executing multi-million dollar transactions and advising a growing client base on wealth management and investment strategies.

As a thought leader in the financial industry, Bamidele has authored several insightful reports, facilitated numerous seminars and webinars, and published a book, “The Smart Investor’s Guidebook” in 2020. His expertise has been showcased on several TV stations, including Channels TV, TVC, Plus TV, and other prominent media outlets, as well as in print media.

As the CEO of PWAN STARS, a fast-growing real estate development company in Lagos, Nigeria, Bamidele drives the company’s vision with his entrepreneurial spirit, inspiring a team of motivated professionals to achieve exceptional results. His leadership has positioned the company as a major player in the industry.

Bamidele Adewole is a member of the Institute of Chartered Accountants of Nigeria, Chartered Institute of Stockbrokers, Chartered Institute for Taxation, and Chartered Institute for Securities and Investments (UK). He is also a member of the Securities and Exchange Commission in Nigeria and an authorised Dealing Clerk of the Nigerian Exchange Group.

 

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