… as coy’s share price drops by 50%
- Move to sell assets unwise – Analysts
Shareholders of Forte Oil Plc have threatened to boycott further investments in the oil and gas company and also, call for the suspension of its Chief Executive Officer, Mr. Akin Akinfemiwa, should the company fail to rescind a decision to sell its upstream services and power businesses in Nigeria.
This threat is coming a few days after the company allegedly made a U-turn, following promises it made to the shareholders in August 2017, that their heritage would not be put up for sale.
The Forte Oil boss had assured the shareholders, eight months ago, that the company would aggressively pursue mergers and acquisition opportunities along the energy value chain, and also acquire marginal oilfields to boost its upstream business.
But the management of the company allegedly made a surprise volte-face, last Wednesday, when the CEO announced in some national dailies its intention to sell the upstream services and energy, and divest from Ghana, to focus on its core fuel distribution operation at home, without giving any reason or alerting the investors.
According to the shareholders, the wise move will be to sell off the shares before the alleged illiquidity state of the company, which the management disagreed with, insisting that it would erode the value of their equities on the floor of the Nigerian Stock Exchange.
Contrary to the stipulation of the Companies Allied Matters Act 2004, and the Corporate Governance Code, that all companies should provide relevant information on the ownership and sale of assets to their shareholders, the investors accused the FO management of deceiving and keeping them in the dark between August 2017, when it held the meeting with them, and May 2018, when it finally told an international news medium of its latest move.
Some of the aggrieved shareholders, who spoke with The Point in separate interviews, lamented over what they described as the nondisclosure of vital information on the company by the management.
They insisted that plans were afoot to stage a peaceful protest and call for the suspension of the CEO, like it was done against the Managing Director of Oando Plc at Ibadan, Oyo State, last year.
In an interview with our correspondent at an event in Lagos, the President, Corporate Shareholders Forum, Mr. Taiwo Oderinde, explained that the non-disclosure might erode the confidence of both existing and potential shareholders of the company, a situation that could further pull down the value of the shares on the Exchange.
According to him, the protest is aimed at getting the Securities and Exchange Commission to investigate and ensure there are no misappropriation of funds, early enough, before the story turns sour like what they experienced with some quoted companies between 2015 and 2017.
He said, “Sharing the expansion vision of the company with us last August and telling the media that it is shedding the upstream arm is a ploy by the management of the company to frustrate the shareholders by pulling the share value and later calling for share reconstruction, which will be at a loss for investors.
“The management must explain to us the reason it declared an increase in its profit after tax of 81.4 per cent and was still calling for sale of upstream arm and Nigerian assets. The PAT grew from N2.8 billion as at 2016, to N12.2billion by 2017, and we thought all was well with the company only to read in the dailies that it was selling the upstream arm.
Instead of selling the upstream arm, Oderinde added that the management needed to cut the benefits paid its employees as it increased by over 200 per cent in 2017 alone.
“Investors should not be the only one to suffer during hard times, employees should also share part of it. For the employees’ benefit paid to have increased from N13.8 million to N57.9 million while investors were not paid dividend, it is clear that the management has an agenda,” he added.
The Chairman, Ibadan Zonal Shareholders Association of Nigeria, Mr. Eric Akinduro, while speaking with our correspondent in Lagos, also frowned at the firm’s intention to sell the upstream and power arm. He similarly berated the management style of the company.
“It is alarming that it ever considered to sell arms that earn it more revenue. While the revenue made from fuels dropped from N121.6 billion to N78.8 billion, lubricants and greases and power generation boosted their revenues from N11.4billion to N12.1 billion and N12.9 billion to N36.6 billion respectively.
“I believe there could be a ploy and infractions because the balance sheet, as it is, cannot be said to be a true and fair position of the state of the company. They must also tell us why no dividend was declared in 2017 and why many investors have not received the script dividend that was declared in 2016 year-end till now.”
Sharing the expansion vision of the company with us last August and telling the media that it is shedding the upstream arm is a ploy by the management of the company to frustrate the shareholders by pulling the share value and later calling for share reconstruction, which will be at a loss for investors
IT’S A WRONG MOVE- ANALYSTS
Findings revealed that the share price of Forte Oil on the Exchange had been among equities that witnessed low patronage between January 2017 and May 2018.
It plunged by over 49 per cent when it fell from N84.22 as at January 2017 to N43.00 by May 3, 2018, after the company struggled to get hard currency to import products.
Some market operators, who spoke with The Point in separate interviews, frowned at the firm’s intention to sell some of its Nigerian assets, especially assets in the power sector, as they described such a move as a wrong one.
For instance, the Director, Operations, Eternal Stockbroking Firm, Mr. Yeni Aina, explained that the management ought not to consider its power generation segment for sale, as it remained the brightest spot within the group.
He said over a telephone conversation that, “Considering the increased capacity of its Geregu Power Plant and the complete overhaul at the end of 2016, selling such lucrative investment can translate into a wrong move.
“The segment’s gross profit in revenue rose by over 200 per cent, from N8.7 billion to N25.5 billion, accounting for over half of the group’s gross profit and providing the biggest boost to its result, as at the end of the third quarter of 2017.”
Another market operator, Dr. Tunji Arowolo, also expressed his disappointment in the management for taking a decision he said lacked ‘deep thought’.
He told our correspondent in an exclusive interview that FO’s energy portfolio was expected to be more positive from the end of 2018, given the inherent challenges to the fuel marketing segment.
He said, “The outlook for the non-fuel segments is more positive as the performance of the power generation segment is expected to remain robust, as GPP ramps up capacity further.
“Also, we expect the recent FG’s N701 billion Power Assurance Guarantee fund to continue to improve liquidity in the power sector. Selling such segment now is not only a miscalculation but a decision that was not well thought out.”
He added that though disruption to gas supply remained a risk, he was optimistic that the current halt in pipeline attacks would continue, following peace agreements in the Niger
Delta.
He said, “We are equally positive on the Lubes segment, as we expect the gradual economic recovery to spur demand from transportation, marine operations and industrial activities.
“The relative improvement in forex liquidity since Q2’17 and the resultant stability in the currency market, should moderate the cost pressure on base oil and consequently support the segment’s margins going forward.”
