By Peter OBIORA InvestAdvocate
Lagos (INVESTADVOCATE)-Union Dicon Salt Plc (UDS) on Friday said it has finalised agreement with GEA Westphalia of Germany to build the largest industrial starch processing facility in Nigeria.
This is in furtherance of the Consumer Goods Company’s transformation strategy approved by its board of directors, to become a fully integrated Agro Industrial National champion.
“In addition to its earlier agreement for its land acquisition of 15,000 Hectares of land in Edo State, this investment will add 2,000 Hectares to its land portfolio, and make UDS Plc the largest Cassava producer in Nigeria,” it said in a statement with the Nigerian Stock Exchange (NSE).
According to the Consumer Goods firm, this transaction will ensure security of feedstock supply, as it moves ahead in establishing its Cassava processing facilities in Edo & Delta State. “It will also fulfill management’s commitment to become cashflow positive before the end of 2016,” the company added.
This is coming on the heels of recent board and shareholders’ approval that the UDS has been diversifying into the Agro Industrial Sector, with an initial concentration of Cassava, and Starch processing.
The company last Monday said its seeking to restructure and has earmarked $100 million for diversification, according to Cordros capital company update.
It said in a move towards expanded production in the identified agric categories, UDS has recently completed investment in the acquisition of land in strategic locations across the country, and plans to spend over $100million in the development of the projects over the next five (5) years. Execution of the projects will be funded through a mix of new equity for organic expansion and growth by acquisitions.
As earlier reported by InvestAdvocate, the company plans to invest over $40 million over the next twelve (12) months towards achieving the production of 10,000 tonnes of High Quality Cassava Starch (HQCS) per annum on the 15,000 Hectares asset. In addition, the cassava harvested from the land will be used for the production of sweeteners (Glucose), and ethanol, an industrial raw material used in the production of alcoholic beverages and cosmetics.
Cordros in its UDS restructuring update said whilst acknowledging the challenges presently faced by the Nigerian economy and its consumer market, UDS believes that both the country and consumer sector’s long term outlook — considering the growing population, strong middle class, rapidly changing tastes/preferences, increasing urbanisation, and growing retail grocery outlets — is attractive.
It affirmed that more importantly, the Consumer Goods firm is concentrating on businesses with 100 percent domestic raw materials base, largely insulated from external risks, and have huge potential for local and foreign demand. Also supportive of the business’ long term outlook is that agriculture is strongly recognized as one of current administration’s thematic areas (which were the cardinal point of discussion at the recently concluded National Executive Council Retreat) of strategic economic importance.
The management of the company will on May 3, 2016 make a statement to the NSE in a “facts behind the restructuring “session were we expect further guidance on their growth strategy.
Shares of UDS at the close of today’s trading on the domestic bourse grew 4.96 percent to N11.22 from N10.69 recorded the previous session; gaining 0.53 kobo per share.
