Mr. Olarewaju Jaiyeola is the Managing Director, Honeywell Plc. At a “Facts behind the Figures” programme, organised by the Nigerian Stock Exchange, Jaiyeola said Honeywell was back in the growth trajectory, as Nigeria exited recession. Our correspondent, NGOZI AMUCHE, was there. Excerpts:
Let’s talk about Nigeria’s operating environment in 2016 financial year. How would you describe the manufacturing sector and specifically, Honeywell, in the face of the dwindling economy?
In the financial year 2016/2017, we achieved growth in both topline and bottomline indices despite the difficult environment. To put it mildly, 2016 was a difficult year. On a global scale, the economy was insipid to 3.1 per cent, according to the International Monetary Fund. Low interest rates in advanced economies, low commodity prices and the growing protectionist and anti-globalisation sentiments, all had significant ramifications for businesses during the year.
For Nigeria, the down-trend in the business environment, which began in 2015, persisted all through 2016, thereby plunging the economy into recession. For the manufacturing sector, this meant difficulty in accessing foreign exchange for critical raw materials and other inputs and a much higher cost base, occasioned by a devalued currency and increased cost of borrowing from a challenged banking sector.
The flour milling industry was severely affected by the foreign exchange crisis, more so, given that our key raw material, wheat, is imported.
Despite the challenging business environment, you recorded growth trajectory in profit margin. How was this done?
Following the first and only loss recorded by the company last financial year, the board and management team promised to return the company to profitability. To this end, we made concerted efforts, every single day, to ensure that the promise was kept by focusing on the execution of the recovery phase of our medium term strategy, hinged on the platforms of growth, efficiency and capability, as critical enablers of success.
We recorded five per cent increase in turnover, resulting in revenue from product sales of N53.27billion. This performance was achieved against the backdrop of the daunting difficulties experienced in the operating environment in the financial year 2017. Our growth agenda was severely constrained by the foreign exchange crisis, which limited our ability to source sufficient raw materials for production. Consequently, and in the face of strong demand for our brands, we regrettably rationed supply to our customers, thereby limiting our selling capacity as the business could have done more.
Last year, you took your shareholders on familiarisation visit to your multi-billion naira foods and agro-allied complex at Sagamu. Tell us more about it?
The shareholders expressed their satisfaction with the pace of the ongoing construction when they visited the Sagamu site of the new factory complex and conveyed their support for the production of food products that use local inputs from Honeywell’s aggressive backward integration programme. The shareholders said with the new facility, the company deserves support and patronage from government, other critical stakeholders and the general populace. Actually, this is where we need the government’s support to do more and give back to the public.
Again, the new ultra-modern Sagamu factory site is proof of the company’s growth prospects and commitment towards reinforcing investors’ trust, even in the face of the current economic challenges.
Recently, Vice-President Yemi Osinbajo spoke extensively on Honeywell’s Sorghum plant being built as one of the many manufacturing installations on the new site. Can you elaborate more on this?
Yes, the Vice-President’s comment confirmed the recognition of Honeywell’s bold backward integration objective that is the cornerstone of this project. Prof. Osinbajo also reiterated that the Federal Government’s resolve to work with and support private sector players demonstrating commitment to value addition and job creation. The project, which commenced in 2014, will see Honeywell invest about N64 billion to develop a world-class integrated facility. It will help to drive down cost and provide Nigerians with affordable food products.
The plant will produce large-scale wheat and non-wheat-based products that will meet present and future food needs of Nigerian consumers, thereby further strengthening the company’s leadership position in the Nigerian milling industry. All factories will utilise local grains, tubers and oil seeds as raw materials to boost farming activities and agriculture in the execution of Honeywell’s backward integration and import substitution strategy.
we made concerted efforts, every single day, to ensure that the promise was kept by focusing on the execution of the recovery phase of our medium term strategy
What are your projections for the future?
Our board is of the opinion that our growth agenda will be sustained in the new financial year, and it will be driven through an expansion of our flour customer’s base and increasing in investments in Route-to-Market and retail redistribution capability. Our resolve to attain advantaged low-cost producer status, through systematic and process-driven change, will be fostered to deliver savings that have positive effect on both growth and margins.
In the course of the year, we will be making critical hires in various functions and roles to introduce new skills and ‘know-how’ where we lack them, and strengthen teams where numbers and depth are in short supply. A rigorous programme for talent development and leadership programme is in the works, while leadership
succession planning is also on the front burner.