By Omodele Adigun
EXPERIENCE, the wise ones say, is the best teacher. And so Nigerian firms wishing to explore offshore markets may need to listen to Mr. Taiwo Adeniyi, the Group Managing Director of Vitafoam Plc. Despite the challenges facing the economy, his candid advice is that they should be more circumspect before opening shops outside the country.
“If one is not careful about offshore business, one will burn his fingers and run back.”
Relating his company’s experience, Adeniyi said: “Out of mental exercise, we are taking products from Nigeria to Ghana to sell. We are constantly being exposed to exchange rate risks”. He reasoned that that might be the major reason some Nigerian companies that ventured out are hastily running back. At a media chat recently, Adeniyi bared his mind on how the economy is impacting negatively on the manufacturing sector and other sundry issues.
EXCERPTS:
Foam history
When we say we import materials, it appears we are not scientific enough to think that those chemicals should be available in the country. If you know that large rubber plantation in Warri, Palmo, we were getting latex from there in the past. The same way Dunlop used to get materials from tyre, we were getting materials for the production of foam. In those days, you could place order for one mattress. And it could take a minimum of one week to put that it together. That is why for many years, you could notice that what was inside those mattresses was fibre, which we feed to goats now. That was what they would dry and, with feathers, put in the mattress and pillows. Those were the things we were using then. Why? It was very expensive to have a foam mattress that would be produced with the materials we were getting from Palmo.If we had continued that way, you and I would probably be still sleeping on the mat. And so the scientists came, this materials we call polyurethane was developed and made available in commercial quantity. These materials were developed from the by-products of petrochemicals. Can you still remember Eleme Petrochemicals? The strategic intention of bringing Eleme Petrochemicals on board was to see if it could actually service that sector. But you and I know the state of Eleme Petrochemicals today. The company has not been able to produce the simplest materials that were supposed to be used by those producing PVC. When you talk of materials used in producing foam, it is of high-tech. They are large linkages of several other chemicals. We have not got that technology yet in Nigeria. In fact, it took Saudi Arabia huge investment to put TBI together,which is the best around the globe now. So , except government, I can’t see any other players doing that.
Another issue is its safety requirements. Even, if you get private investors coming into this environment, they are not convinced yet. For the TBI plant, which is meant to burn, ordinary issue of water (shortage) can cause fire. So we have not attained that level of safety in our environment. Government is not even looking in that direction. All they are saying is, ‘ok if you have access to where they are being produced and you can buy, please keep buying’. If you site a TBI plant, for instance, anywhere in this country, it has to be where they put lepers in those days: nobody goes there. That is the kind of things we are talking about TBI. It has to do with safety; it has to do with the cost outlay to be able to have such plant around here. That is why for us, we are still buying because they are still available. The developed countries are still investing in it to make sure it is still available. Foam technology has come to stay. In fact, foam is virtually in everything. The chemistry of foam goes beyond the production of foam. Several other things-the shoes you wear-have an element of the same polyurethane in them.
Offshore subsidiaries
You are very correct to say that if one is not careful about off shore business, one will burn his fingers and runs back. That is why a lot people that had gone out had to run back. We are experiencing that in Ghana. Again, out of mental exercise, we are taking products from Nigeria to Ghana to sell. We are constantly being exposed to exchange rate losses. The Cedi, as long as West Africa is concerned, is probably the worst currency at this time. You can get there in the morning, it could be one for one.A nd before you close in the evening, it could be one for four. That is the way the currency is. But what we have done is to look for strategic partner in that environment that produces foam and allied products. What they do for us now is to produce such products that we can make available to the market. That has helped us to hedge against foreign exchange loss.
As for Sierra Leone end, like I said, it is a full-fledge factory.Like you rightly said, Sierra Leone is about six million in population. You ask yourself, why should I establish a factory in a country of about six million people. The intention is not to service Sierra Leone alone. The country borders Guinea and Liberia.These are heavily dollarised environment. The whole strategic intention is that today, it may not have taken up properly as we expect it to be. But those companies are supposed to provide forex to the centre. That is the strategic intention. They are dollarised environment; they are supposed to provide the Dollars needs.It may not be happening now.But looking into the future, that is the plan.Now you can imagine if Sierra Leone and Ghana have been properly positioned. If we have achieved our plan for such environment,all they need to do is to send the Dollars to us and we use it to buy the materials that are required. After all, the government has not stopped forex inflow.
Economy
We can not exist in isolation; we are existing in a space. To tell you, the economy has not been particularly friendly. I stand to be corrected. If you talk to any manufacturing companies around us , they will tell you that it has been tough. It is as if the policies of the new government are targeted at frustrating the manufacturing sector. It could be viewed that way. But , of course, contained in it is the fact that you also appreciate the fact that the government is trying to do a lot of cleansing activities. But at the same time, those cleansing activities, those recovery activities, those efforts at putting the economy back on a sound footing have not done too well for the real sector. Eighty per cent of the materials we use for production is sourced outside the country. Eighty per cent in the minimum. What that means is that, constantly, I need to have access to foreign exchange (forex). Even though, for us in the foam sector, we have not been taken out of the list of those that can access forex from the CBN, the question is, where is the forex? It is not available. In the past, it was easy to do an LC (Letter of Credit), and within two weeks, you get your LC. But these days, it can be on for months. The LC request to banks, some of them have been there for the past three to four months. And yet, we have not been able to establish it. And even when you get it, most times, when you have established an LC and you need to fund it, you are told to make cash available for bidding 48 hours. These are government policies that banks can not do anything about. Forty eight hours, you have to make the cash available, for you to even be considered for bidding! You can imagine where in an economy that is practically run by buying and selling-you give your goods to customers, they bring money. That is when you can go and spend the money. And then CBN is saying 48 hours, before you spend that money, make it available. It is a tough one! It is one thing we are battling with as a company. Again we began to look at what else can we do. I am sure the government is as bothered as all of us.Even the FCT minister recently said that unless the government quickly put a very strong economic team together, we would be in a serious trouble because there is no reserves anywhere.Oil has proven to be gone.And it is going for a long time.The government has to has to quickly look at it.
Operations
About five years ago, the management came together and took a look at the business of the company. Today, you see our logo, ‘Vitafoam much more than mattress’, because by that strategic move, we have been able to come up with at least four other subsidiaries and two core extension of Vitafoam.One of the subsidiaries, Vitapur Nigeria Limited,is into the production of rigid foam; polyurethane rigid foam. They do insulations, housing, partitioning and even construction of housing. They play very well in the oil and gas doing pipeline insulation, where you have to keep the pipelines at certain temperature to allow for crude to pass through them. We service a number of the shopping malls in Nigeria., for the cooler system and cold room system in the shopping malls. We produce panels that enable those cooler boxes to be constructed. Of course, you can’t bring in those things from outside this environment. We play also in the construction of porter cabins, and a number of that we do for the oil servicing firms where they don’t necessary have to do brick and the mortar. The unique thing about the use of those materials is that it provides what we call the green home construction; the materials are eco-friendly. It is not like the brick and the mortar; it is quick to assemble. You don’t have to wait for ever, the issue of omo onile is eliminated. You have a straight platform and you put up the building. .
Another subsidiary of Vitafoam is Vitablom Nigeria Limited.It produces fibre pillows.In short, they do soft furnishings because when Vitafoam produces the mattress , nobody sleeps on the mattress that way. You need bed sheets, you need pillows; you need pillow cases, you need duvets, in some cases.
We have Vitavisco, vita in visco. That is from the visco elastic products. These are specialised pillows beyond the normal foam or fibre pillows. These are specialised products, from pillows to back support; to seat support. Those that have just undergone surgery. You know when they stayed at a particular position for a long time, they develop sore. So we have a product that helps them cope with that particular stage of their lives and so many auxiliary products. In fact, the company is currently considering producing spare parts for vehicles. If you have seen the shaft of a car before, you know that there is this rubber tube that covers the end of the shaft. That can be produced from polyurethane materials. Currently, the company is looking into producing those materials. These are little items that, ordinarily, should have never been imported into this country. With the plan of the Federal Government to invest in automotive industry, such materials should no longer be flown into this country or be brought in by way of portfolio importing. As part of the expansion drive, before the year ends, a new subsidiary of Vitafoam will be coming on board that will be producing oil filter. And it will go beyond cars, to the utility vehicles, generators as well as water filters.
We have Vitagreen. A lot of us, especially the ladies, talk about very light shoes- you want to go around in a very casual and light shoes-we have also come up with shoe sole produced again out of polyurethane materials. One thing that is unique and common to all these products is that we are still talking about one particular body of chemicals: polyurethane. They all have polyurethane items. You have shoe soles, we have casual wears, sandals and slippers, which are already in the market space. We have the very recent one where we always had a percentage holding. Just before mid-January 2016,we consumated the merger to have full ownership of Vono Products Plc.The strategic alliance with Vono sprang up from the fact that we wanted to provide a complete solution. We have also Vitafoam Ghana Limited where we produce products in Nigeria and ship them to Ghana. It is purely a sales outlet. We also have Vitafoam Sierra Leone Limited. This is a full-fledged factory like we have in Nigeria, but it is a subsidiary of Vitafoam Nigeria.