West Africa: Nigeria retains dominance

There is no doubt that Nigerian firms have enjoyed strong growth over the past year. The country’s infrastructural shortcomings remain a burning problem but international confidence in Nigerian stocks and the Nigerian economy is increasing year on year.

Nigerian Bottling Company achieved 25th position in our regional table last year with market capitalisation of $330m but Skye Bank needed $519m to secure the same ranking this year. There were only 10 West African companies among Africa’s 100 biggest last year but that number now stands at 15, including nine in the top 50. Much of this improvement can be attributed to the recovery in the Nigerian banking sector but the construction and consumer goods industries are also performing well.

The Nigerian economy is currently growing by 6.5% and – if sustained – this trend is likely to be reflected in the number of the country’s corporations ranked near the top of our table. Dangote Cement has extended its already substantial lead over West Africa’s other big firms over the past year. It is valued at $14.5bn in this year’s regional West African table, up from $10.5bn in 2012. Dangote is expanding its operations rapidly, both in Nigeria and in the rest of West and Central Africa. The company’s production capacity has increased from 8.25m tonnes a year at the start of 2012 to 19.25m tonnes a year today with the completion of the Ibese and Obajana plants. A further 10m tonnes a year will be added over the next two years. Sales have increased from N241bn ($1.5bn) to N298bn ($1.9bn) over the past year, despite gas supply problems in Nigeria and the company now enjoys a 60% share of the domestic market. The company plans to secure a listing on the London Stock Exchange, probably next year. Chief executive Devakumar Edwin said:

“By the end of 2012 we were preparing to make Nigeria an exporter of cement to neighbouring countries and in the first quarter of 2013 we realised that goal.” Nigeria still has some of the highest cement prices in the world, indicating that demand from the construction sector remains strong.

Nigerian Breweries has also enjoyed a substantial jump in value, from $4.3bn last year to $7.7bn in this year’s survey. This moves it up from third to second in our table. The company, which is 37.74% owned by Dutch firm Heineken and 45.9% owned by Nigerian investors, announced an increase in total revenue for the first quarter of this year from N61bn ($384m) to N64bn ($403m), although profits for the period fell 3.27% to N13.58bn ($86m). Rival Guinness Nigeria also saw its profits fall, as the beer sector as a whole was affected by a slowdown in spending and the entry of SABMiller into the Nigerian market. Referring to Guinness, Tunde Abidoye, an analyst at FBN Capital, told journalists: “It would appear that the company has not yet recovered from the squeeze on household wallets that affected most consumer names last year and brought about a slowdown in beer consumption. In addition, we feel Guinness Nigeria’s beer volumes are seeing increasing competition.” Nigerian companies obviously dominate the table, with just three Ghanaian firms and Sonatel to represent the rest of the region. Sonatel is based in Senegal but registered on the Bourse Régionale des Valeurs Mobilières (BRVM) in Côte d’Ivoire. Ivorian firms remain absent from our table: the 12 years of civil conflict and economic uncertainty continue to affect the value of the country’s biggest companies. What was once the economic powerhouse of Francophone Africa will take years of rebuilding before it resumes its former importance.

The strength in depth in West African firms is highlighted by Ecobank Transnational International. The company’s value has increased from $677m in last year’s table to $1,049m this year but it remains in 15^th position in our regional table. At the same time, it has now become the 95^th biggest firm in Africa, up from 130^th in last year’s survey.

However, Ecobank may postpone plans to buy a stake in South Africa’s Nedbank Group to focus on its operations in other countries. Chief executive Thierry Tanoh said: “We can capture African growth and increase efficiency at the same time and when that’s done, there’s the option with Nedbank. It’s not the time to talk about it now.”

New entrants

There are 20 companies in our table of Africa’s Top 250 companies that were not ranked last year. Some are included for the first time but many have been included in previous years. They come from across the continent but most are based in Africa’s biggest economies: there are six each from Nigeria and South Africa, and four from Egypt. The remaining four come from Ghana, Kenya, Tanzania and Zambia. It is heartening to see that the 20 companies come from 13 different sectors, ranging from banking to real estate to entertainment and leisure.

The highest-ranked company is IT firm Dimension Data, with a market value of $8.3bn. The firm has set a target of doubling its sales to $12bn by 2018, partly through acquisitions but also through the expansion of its cloud computing services. Speaking at a recent conference, chief executive Brett Dawson said: “As we go forward in the next five to 10 years, we are going to have to provide a lot more platforms, a lot more infrastructure ourselves.” Kenya’s ARM Cement, which was known as Athi River Mining until last year, enters our table in 190^th position, with a market capitalisation of $374m. It recorded a 31% increase in profits for 2012, up from KSh1.36bn ($15.8m) to KSh1.79bn ($20.8m), on the back of a 64% increase in cement sales in its domestic market. Its Tanzanian plant came on stream last October and exports to Rwanda are continuing to rise. In a statement, it reported: “The Group expects to register another year of strong growth and improved profitability on the back of new capacity in Tanzania and increased capacity utilisation and efficiency in operations in Kenya.” Apart from cement, it also produces fertiliser, lime, industrial minerals and sodium silicate.