Managing Director, Cormat Nigeria Limited, Martin Middernacht, in this interview with journalists talks about the company’s growth, challenges and prospects. Ugo Aliogo presents the excerpts:
What has been the key challenges faced in running this business?
One of our major challenges is manpower. The second challenge is power supply. In this company, we invest huge amount of money in having our own electricity. We don’t rely on the national grid for power because the quality of the power is poor. In our factory in KM 51 we have pipe gas, instead of diesel which is much cheaper, the private sector invested in that and this makes production and operation cheaper. The third constraint we have is finance. Surmounting this, the interest on loans (finance cost) is between 11-14 percent depending on the bank. But we went through periods of 25-30 percent. There is no place in the world where a business establishment can survive at high financial cost. The fourth challenge is the availability of a favorable foreign exchange market. In 2019, we had stability and the economy was better, the interest rate dropped from 20 to12 percent. Despite all the challenges, we grow 30 per cent every year. That means there is a way out of all of these challenges if you do it the right way. Although we have some constraints, we believe in the country Nigeria. Nigeria is the biggest country in Africa so the opportunities are there.
What is the worth of your investments in Nigeria?
The cost of the land at KM 51 is $2million. The cost of the entire facility is $25 million.
Looking at the facility at the factory, what does the company plan to do going forward especially in the area of diversity?
We are continually planning to diversify. The TGI group and Cormart have wide range of products. The latest area of diversification relates to concrete hardeners and tile adhesives. In the second part of our journey, we intend to go further into diversification. We organise all our activities not as Cormart, but the entire TGI Group. The slogan of TGI is diversity. The main goal of Cormart is not profit, but sustainability. The drive is that we have planted here will still exist in the next 50years time. What we will like to have is sustainability not only because of our legacy, but to ensure that people who work here are sure about their jobs and in 20-30years they are here. Moreover, the goal is to ensure that our operations still continues and go further. It also to contribute to the industrial development of other companies. We are also enablers to other companies. If any organisation or company wants to produce something, we make it happen for them. When it comes to industrial development in Nigeria, Cormart is at the centre of development. This is overall what we want to do. So everything that is short and mid-term, are basically steps on that way such as having more lands, additional factories and setup more plants. But those are small steps and the overall target is industrial development.
The closure of border, has it impacted your business?
On the negative side, I would say no. But positive impact most probably? Yes. I would not be able to measure the extent of the impact on our businesses. When you grow in any business, there are different areas to focus on such as quality, marketing, and promotion. For us at Cormart, the border closure has not had so much impact. Remember the key focus for us as a group is our business to business, and raw materials. But our ranges of products are those coming from the seaport, which includes industrial raw materials with five percent import duties.
How has the recent increase in Value Added Tax (VAT) affected your business?
Increase in VAT is a recent development. But it will have an impact for sure. Whether it will have a long impact I don’t think so. The impact might be felt at the end of the first quarter, say maybe April/May. VAT is 2.5 per cent more. Basically that comes out of the pocket of any consumer. The VAT is going from producer to distributor to final consumer. It will have an impact and the consumers as we will see a price increase. Within two or three months that impact is gone.
What has kept your company going especially in doing business in the last 40 years?
What has kept us going is our strong believe in the potential of this country. We plough it back and that made us to widen the constraints. We believe it and we shall continue to invest. Of course, there are some issues, but we keep believing.
What is your projection for Nigeria’s economic growth, are you optimistic about its growth?
Yes, I believe in Nigeria’s economic growth. However, there is a shift. The shift is tending more towards to agriculture which is very good. The government made a very wise decision to stimulate the agriculture sector and pump money into facilities available because if you are importing agro-products such as soya beans, maize and others, the impact on your forex will become bigger and bigger. In 20 years from now, we have to focus more on alternative source of energy, than electricity therefore the need for electricity will still be there and it will have impact on your income. Then you will have more mouths to feed, so investing in agriculture is very important. Moreover, to shift from the oil and gas industry is why there should be increased investment in agriculture. To develop the agro-value chain, the sector has to be better positioned to compete globally. The yield of maize overseas in a one hectare of land, you can get eight, nine to 10 tonnes per hectare. While here in Nigeria, you get maybe two tonnes in a one hectare of land.
What are your expectations for 2020?
Our expectation for 2020 is 40 per cent growth. We have a few projects in the pipeline that are coming up. We are investing N2 billion this year and many of those projects will run till 2021. We are in discussions about several projects in the pipeline. We have the upper hand because we are experts in not just chemical raw materials, but the application of these raw materials to meet individual client specifications. Also, our sister company, Chi Farms, is a market leader in poultry. We do not only sell commercial broilers but we also have Nigeria’s only Grandparent stock farm. These and many more are great potentials and advantages that we have as a company. We are truly excited about 2020.
Cormart will be 40years in August, how has the company been able to scale in terms of growth and investments?
If you look at the last 40 years, the development was not even. Our growth to this scale was gradual. Much of the progress we have made as a company, started in the 90s. The biggest jump of growth began when our sales moved to a higher level and we started to have our own depot in the Nigeria. From the investments we made, we started seeing increase in growth and volume of businesses, and this made the difference. Cormart initially began reselling Chivita in Nigeria. Later, we diversified and bought equipment to make Chivita locally in Nigeria. It was a gradual process. In terms of business, World Bank believes in trade liberalization which means there is no government involvement. The World Bank said to Nigeria and other Africa countries that they don’t want to give loans and facilities to them, but to take a step backward out of the private industry and sell off some State owned companies. In that period, we bought some of the State-owned companies and that gave us some increase of turnover. It all has to do with seeing opportunities and having the courage to invest in it. From the beginning, there was no master plan as such. Rather, we saw opportunities and moved forward with them.
What measures will you suggest to position the agro-allied industry?
The industry needs certain level of technology, human resources and development of human capital, access to capital and protection for producers.
What are you doing to increase your market share?
We have dedicated an export team and we are already selling to Cameroun, Niger, Mali, Benin and others. Furthermore, we have a product known as Vinko bond with huge sales potential due to its accessibility. If it is in 10,000 outlets today and you can bring the product to 20,000 outlets. Third point is having specialized and premium rates.