We are refocusing Odu’a for profitability –GMD

Mr Adewale Raji, Group Managing Director of Odu’a Investment Company Limited, the conglomerate owned by the six states of the South West, last week paid a visit to the management of the African Newspapers of Nigeria (ANN) Plc, publishers of the Tribune titles at the Imalefalafia, Ibadan head office. He spoke about the vision that birthed the conglomerate, the current effort to refocus it as well as its future. Excerpts:

The Odu’a Vision

Odu’a Investment, though we claim to be 40 years if we count by virtue of years, what we have on our stable is by far older than 40 years. We are privileged and honoured that we have the singular opportunity of sharing the same founder with Tribune; we can say that Odu’a was established with the same vision that made Chief Obafemi Awolowo establish Tribune, which claims first in many things. In our stable are many heritages either directly under us or entities in the South-West, which existed before the establishment of Odu’a, which are also first in Nigeria and even beyond. We are privileged to have the Cocoa House, which at inception was called Ile Awon Agbe; that building will be 51-years-old next month and the vision behind it, either as Ile Awon Agbe or Cocoa House, was how our forbears, led by Papa Awolowo, thought that they were not just taking care of our today but also securing a very respectable place for the Yoruba nation back then and in the future. They took that initiative of building what was the first skyscraper in sub-Sahara Africa; a 25-floor building opened in 1965. If a house was opened in 1965, it must have been conceived five years earlier. So when we think about the dreams that they put into reality from 1959 to 1965, they are really commendable. If our generation and the coming generation can have half of the dreams they had and implement 10 per cent of them, we would be living in Eldorado today.

I think the challenge that we have, especially those of us who are privileged to be trustees of that heritage of the South-West, is: If our parents bequeathed those legacies to us, what we should bequeath to our own children should have additions from us and not that we will pass down the same things we inherited from our parents. That is the challenge we have at Odu’a. So, in coming to terms with this reality, we have gone through our tough times. I happen to be the eighth Managing Director of the Odu’a Group and we have been privileged to have technocrats and seasoned administrators who have played their roles. What we have as our major challenge today is taking Odu’a to the next level and I will want to share a few things with you.

The board and management of the company have taken some decisions, which are the outcome of strategic retreats. We have tried to look at the business properly as an investment outfit; an investment outfit that has both social and economic responsibilities to the people of the South-West. As an investment, it is important that we grow the business, deliver profits and give back to our owners and also meet the aspiration of all stakeholders. Typically, the stakeholders are all Yoruba sons and daughters. So, for those of us in management, it is a rare honour that out of the agglomeration of Yoruba sons and daughters at home and in the Diaspora, estimated at about 35 million, we are privileged to be the people chosen to manage the investment owned by the Yoruba people. So, what we have done is to build a strategic plan where we look at growing our business from a relative N4.5 billion turnover a year to N20 billion in five years. What convinced the board about this was that we are starting from a low base; when we mention N4.5 billion, it surprises people that we have such a low base but we then challenged ourselves that in five years, we can do N20 billion.


Plans for tomato factory

On landed property, our forbears, who were founders, had creation of jobs, impacting capabilities and building the skills capabilities of our people as part of their goals when they were setting up the different enterprises they had. You would find out that if they entered into equity with foreign companies, it was an opportunity to make sure that they can grow indigenous capabilities. In some areas, we also went into building industries ourselves. I will limit myself to Ibadan for example. Like the Nigerian Wire and Cable, it was something that Odu’a got involved in Sumitomo of Japan. They owned 40 per cent while Odu’a owned 60 per cent. They were in charge of the management and the whole idea was that we could produce cable for the housing industry and we got involved.

The vision is not different; we have the same vision of capabilities for our people, jobs for our people and real social impact on our people. So, what we have decided is that we are going to leverage on our land bank and make sure that we get involved in what we call integrated agriculture project. That entails from farming to processing in the same location. I will give just one example of the plans on our table. Our lands are spread over four states totaling 40,000 hectares. Our view is that in the past, we did agriculture on them but our yields were dependent on climate and our harvests also came out when others were harvesting. Since human beings cannot consume and retain it for the future, the yields were wasted. What we have done is to come up with what we can call elements of mechanised agriculture and process the outputs. So, for our land at Imeko in Ogun State, a business plan and the feasibility study has been done and the land was found suitable for tomato production on a very high scale. We have taken time to do the in-depth study and we had foreign experts who did this and the outcome was positive and exciting. Right now, we are at the point of choosing foreign partners to do it. What we have in mind is to cultivate tomato and from the output, we will process tomato paste. What we are looking at is that by processing into paste, we will give as much as additional 24 months shelf life to the output, so the element of everybody’s yields and harvests coming up at the same time and leading to 30 to 50 per cent post-harvest waste does not exist. We simply process them and because they are already processed, they are there for the next two years. In doing this, we cannot rely on hoes and cutlasses; solid agricultural implements will be involved either in making the land or in irrigation, to ensure that instead of one season of tomato, we can actually do two seasons of tomato production in a year. If we do two seasons in a year, the equipment installed to process, instead of doing one season of production and resting for three months in a year, we can elongate their life to work for six months in a year and that will affect the bottom line. Doing this requires that we have improved seedlings, which are outcomes of research.

Going by what we currently plant as tomato in the South-West, from a hectare of land, you can have seven tons of tomato output. But the business plan we have says that if we test a lot of varieties, a pilot scheme, we can get 40 to 45 tons from a hectare. That is like seven folds from the same land. That makes sense when you talk about industrial output of raw materials.

We don’t believe in just running the farm. We must do extension services for neighbouring farmers so that they can also set up farms similar to ours and our output will guarantee them a market. We have taken that approach from two points of view; social and sustainability points of view. We believe that the way to lead people out of poverty is that what we have learnt or what we have the money to do, we should impact on that community by bringing it to them. That will not just give them the capability in terms of know-how, their pockets will also be better off.


Status of the plan

Mr Adewale Raji, Group Managing Director of Odu’a Investment Company Limited and Odu’a state governors. From left, Amosun (Ogun State); Ajimobi (Oyo); Aregbesola (Osun); Mimiko (Ondo) , Fayose (Ekiti); and Ambode (Lagos)
Mr Adewale Raji, Group Managing Director of Odu’a Investment Company Limited and Odu’a state governors. From left, Amosun (Ogun State); Ajimobi (Oyo); Aregbesola (Osun); Mimiko (Ondo) , Fayose (Ekiti); and Ambode (Lagos)

The business plan is ready now and we are talking with different partners and funding agencies at the level of Bank of Industry, Bank of Agriculture or African Development Bank. We are talking to them to make sure that we get what we call long-term funding. If we do this correctly, we will remove the taboo of people believing that it is people who have voted for poverty that get involved in agriculture. I want to add that because of the tomato project we are trying to do, it is becoming clear to us that we, as Nigerians who import tomato paste, end up funding American farmers who ride in jeeps. The common man in Nigeria is buying paste and is funding the American farmers riding jeep. So, what we are trying to do is that since it is done in America that the common people enrich farmers, we are trying to copy and paste. And we are following all due diligence to make sure that we do not make any mistake in our attempt to copy and paste.

More importantly, we believe that people following our foot step in this agriculture venture will be the greatest legacy and we also want to encourage young people to believe in agribusiness. There are enormous challenges with it but that is why we, as a conglomerate, have a better opportunity to handle this and then encourage others to be part of us so that confidence starts building where people can be sure that if they cultivate one hectare and earn N1 million, they can say that if they cultivate two hectares, they can get N2.5 million. We are proving to our people that this can be done, we can show that we can bring back those high expectations of our people, because joblessness is quite serious at this time. It is easy for us to put our money in shares or fixed deposits and do nothing, we will earn money but that is not the vision of our parents. If our parents did that, we would not be sitting on any inheritance as trustees today. Their vision remains realistic today as it was in the 1950s. Sharing the same kind of heritage with Tribune, I can say that our DNA are quite similar and we know we can count on you as an ally and when it is time to celebrate, I believe we will celebrate together. We believe that if Odu’a grows its business, our visibility will also be higher and that is why we have set this kind of ambitions for ourselves, because that allows us to match our visibilities with our financials.

Last year, we paid dividends for the first time in six years and our reason for that was that we didn’t want to have any baggage with our owners. We want to make sure that when we present things to them and they are convinced that we will get their approval. Recently, we presented to them the strategic plan which they approved; we also presented to them the interest of Lagos State to join the Odu’a Group, they approved it. We presented to them our plans towards the hospitality industry, our hotels, that we need to take them to the next level and they approved it. Right now, we are on the verge of appointing a top consulting firm to midwife us through that process. Our belief is that unless the owners trust us we will have issues with them, and one area through which they can trust us is to be responsible financially. We made it a major plan to pay N167 million to all our shareholders last year and this is something we’ll make steady. And as we grow our portfolio, we do believe that we will give back to our owners so that whatever we need from them in the future, they can give us. There are many opportunities, but what we need to prove is the doing; there are many things falling on our laps but because what we can show as evidence of what we have done are more in the past, there is a bit of carefulness but once we do things right, there will be many more that will unfold.


Funding the projects

Let me be very frank; we are not sitting on top of money at Odu’a. However, we have a sense of mission and commitment. That commitment, we have got it to a level where in common parlance, they say you put your money where your mouth is. This time round, the position we have taken is that we will get equity partners and we will also take on debts. Equity partners mean that the experts we will work with, whose expertise is important, will contribute part of the money required and a sizeable chunk of the money will also be by borrowing, because we believe in the project. But the seed money, which is the equity, we will be committed to it. Let us say the project is N3 billion and in a situation whereby N500 million to N600 million is coming from the promoters, then you can borrow the remaining. We have taken a position that this is the way to go and it shows that we are committed to the project. That is how we are looking at funding.

We also believe that part of the funding is that we need to take advantage of the goodwill that we enjoy and the assets that we have. If you have lands and you want to do agriculture it is different from not having lands and conceiving that you want to do agriculture; getting lands would have been part of the problems. It is as difficult as funding itself, so we are privileged that we can use the lands that we already have and use them as parts of the collateral, it means we are already one step ahead. And the consultants we have used also, have written a report that is tenable to any of the development banks. The second issue is that should we want to approach Bank of Agriculture or Bank of Industry or even Afreximbank, AfDB or any other, where you are looking for single digit and long-tenure facilities, we believe that the element of our business growth was built on that and the second element is that the technical prowess that we display; it demonstrates that we know what we are doing. So, we want to approach things from that point of view. We are not deceiving ourselves as to the strategy we want to use.


Improving Odua’s hospitality business

What is clear to us today, even without in-depth research, is that Nigeria has moved towards globalisation but our hospitality business has not moved with that globalisation. Globalisation means that there is only one global standard and people no longer recognise that a hotel is in Papua New Guinea, Niger or United Kingdom, they want the same quality anywhere and in fairness, they also pay global amount. In fact, Nigerians pay higher than the global rates for hotels. So, when we look at our hospitality business, we know that market demands today are for high profile and well-grounded hotels, which is more like fishing from the ocean. People look for the Hilton, the Marriot, the Shangri La, the Jumeirah, which are like global icons with global standards. Expertise and technical knowledge come into most of these places, they are already structured and what these hotels do is just try to impart this knowledge in whichever location they find themselves, even on an island. As long as they put any of these brands on the hotel, they will put the knowledge in those people that will allow the hotel to have their global quality.

So, what we know now is that our hospitality business today lacks in expertise that matches today’s global standard and we do not have that expertise internally. Number two, we have not pumped enough money to lift the quality and standards of those places. These two things, when done, will put us on the same standard as any of the hotels I mentioned earlier. So, the actions we are taking, which the governors have approved, is for us to use consulting firms that will help us define all these things and will also bring in the necessary expertise to move us to the next level. With the right expertise and high funding, we can get to that level of the Proteas of this world, which are very recent development in Nigeria. Any Protea outfit you enter, you see a minimum standard that the ambience is encouraging and the way you are treated or even when you are given the menu or you do your booking. The way it is now for Protea, you can just go to the website and book any Protea or Hilton. We need to get into that type of league where what we offer is offered globally. Just to say you are coming to Ibadan and you now say you are looking for a Marriot or a Shangri La, and you do not find and you just press a name and that there is one hotel called Starwood in Ibadan, people just go ahead and book it, they don’t care. They have never been to Ibadan before, but they book it because they know whether it is Starwood in Osaka, Tokyo or the one in Budapest, same thing applies; they are secure, and you know the negative thing they talk about Nigeria it’s as if they are going to abduct you on the road. So, people believe that in the hotel they are going, nobody is going to abduct them, because it is assured all over the world. This is the standard we are looking for and so expertise and finance are the things we are trying to get. We will also back it with our own money along with the partner just to give confidence that we are not just trying to push people into a death trap.


Epe Plywood

We have not committed anything specific to Epe Plywood but I can tell you, I have had two conversations with His Excellency Governor Ambode and he kicked hard and what I told him was that our hands were tied. Our view at this point, though we have not been able to have anything concrete on ground, has to do with the current demand as far as wood-related product is concerned. What we require is a situation where we can lay our hands on a technical partner who does something similar. We have done some trips; we have gone to Turkey and we have seen what they do on wood, which they call Medium Density Fibre (MDF) which can be converted to anything you can talk about. MDF, from our interaction, is 80 per cent soft wood and 20 per cent hard wood. Traditionally, what we grew up with were iroko and mahogany, which are all hard wood but modern technology is using lesser part of hard wood but because we don’t realise it and we don’t do afforestation along that line, we haven’t got the raw materials. So, Nigeria needs to look into afforestation where you then convert to the intermediate product, which is what they call the fibre, and it is the Medium Density Fiber made in different form that people now shape into either our furniture kitchen, our hotel furniture, our furniture for classrooms, our furniture for hospitals etc. What they just do is that they change the finishing. I saw a plant where if you want it to have finishing like skin, the base is still the same but they now print that thing that looks like skin and that is what they laminate on it and what it would look like but it is still Formica, it is still the same thing.

So, on Epe Plywood, what we are looking for today are genuine investors. Governor Ambode has nominated someone who we are working with, hopefully one of the things we are asking also is for the government to help us with investors. We will play and there is a reason why we will play, impacting people is very important in whatever we want to do. And unless we do it in those communities, our ability to be able to impact people would be low.


Nigeria Wire and Cable

Nigerian Wire and Cable was a venture between Odu’a and Sumitomo of Japan and I think that is where the reputation of quality came from. The Japanese owned 40 per cent at inception and they were also in charge of management. Then the Japanese left and sold their holding, which Odu’a bought and Odu’a became 100 per cent owners. I did mention the elements of management and military rule; issues about governance. At the time Nigerian Wire and Cable was closing shop, our ownership as Odu’a was 15 per cent and the company owed a debt to the then Afribank, which subsequently went up to about N400 million. So, because I have, on assumption of office, reviewed the situation, I asked myself questions on whether we want to get involved in the business and its debts. Of course, people showed interest based on the reputation of the company’s cable and till now, cable is still in demand. Coleman Cable just opened a second plant. But the question is that Odu’a has become a minority holder; there is a debt and there is also a majority holder, so Odu’a could no longer call the shots. I was quite frank, because I got this information and when it became clear to me, I said how can we as 15 per cent holder be the one that would say we are going to resuscitate the company? Are we ready to buy over the majority owner and are we ready to pay the debt before we talk about running the place? So, what I said was that if our feasibility study says that we are still going to do a cable business, we would start afresh on a clean slate and not get involved in the one that is encumbered and we would find difficult to take care of.

That is the story of Nigerian Wire and Cable; it is a very sad one but from 100 per cent holder to become 15 per cent holder, you know that we mismanaged ourselves.


Ire Clay Products Limited

At the moment we are in joint venture partnership with Ekiti State government for Ire Clay Products Limited that used to be old Ondo State Brick Factory. It was resuscitated and it came into operation back in 2015. We are 30 per cent owners there and Ekiti State government owns 70 per cent. We are responsible for management and between us and the other shareholder, it is agreed that we just need to stabilise the place and look for an equity holder who can buy majority to run it, so that government’s 70 per cent interference will not affect the future of the place as it affected it in the past. This was something Papa Ajasin set up and he was in office from 1979 to 1983 but people could not take it further because of self-interest.


Cocoa Industries Limited

The background that I have is that we remove sentiments when we are looking at business. We have looked at Cocoa Industries Limited and that was in late 2014 and 2015 and what was clear to us was that we could get it going by starting a new plant for 25 million dollars. When we converted to Naira at 200 to one dollar, it was N5 billion and that will be a new factory that will produce top quality separating, making sure that the jewel, which is the butter, is maximally harvested. You know you will get 100 per cent butter, because that is where the money is. The international price of a ton of butter costs $5,200 to $5,600 whereas the cake costs $1,400. So, you have to extract the maximum quantity of butter, otherwise you are losing money if your process does not get that. So, we looked at it and we looked at the international prices and the local price; what was shocking to us was that the study that we did between October 2014 and February 2015, the raw material, which is cocoa beans, the price changed by 40 per cent. The local price of the cocoa beans increased by 40 per cent, but the international output did not change. So, I said this does not obey the laws of economics. We asked further questions and finally we got answers that it was as a result of capital flight; one simple way of doing capital flight is you access Naira and you just buy anything that is exportable, so you don’t care about the price, it allows you to convert it to hard currency. So those people come into the market and they totally kill any other those buying for processing, because if your selling price is not changing, how can your buying price of the raw material change by 40 per cent. So, that business plan is sitting on our shelf after it was presented to our board and the decision is that when the pricing of cocoa beans is right, we will look into it.


Askar Paints

We looked at Askar Paint that way too, because paint-making is a low barrier entry business. There are only two companies that are making profit in paints today; Berger Paints and CAPL, the makers of Dulux. CAPL is UACN subsidiary, so they sell a lot to their sister company, UPDC, so they are able to charge premium because of their names. But there are many backyard paint makers, so the issue is if we revive Askar Paints, we will not be able to price like Dulux. Nobody will pay Dulux’s price for Askar Paints. Maybe they will not even pay Fine Coat or President’s paint price, so we might find ourselves competing with someone who produces paints in the backyard. So, to break even will be difficult. We looked at it, we saw the money we would need to put in and said no, with our kind of structure and image; we cannot afford to let people come to our company and see people stirring paints with stick. If we compete with these people, we will go bankrupt. If there are specialised areas, maybe marine coating and all that, we can look into and even that, we need international accreditation to certify what we make. But if there are those kinds of opportunities, we will look into them. We can still do something on paint making in the future if the stock profile of houses increases and we get into a situation where 10 to 15 per cent consumption of the paints comes from us. So, we are careful in terms of looking at any industry that we currently have, but if we get it right; we will do it.


The five-year strategic plan

We released the strategic plan at the end of 2014; we got the approval of our governors in January 2015. It was difficult to get our governors to sit; there was no attraction to make them sit, because they saw us as just existing. But now, we are trying to demonstrate that we do not just exist; that there are roles we can play in their lives and we managed to make them see that. That is why in that strategic plan, there is the issue that relates to our agro-allied business; we believe that it is one of the things that can help us to make a quantum leap. If we do that and we get N3 billion to N5 billion in turnover, that is like 25 per cent of the figure we set, the confidence we will get from it will allow us not just to do one but three. That is where we see ourselves.

Two years on, what I can tell you specifically in terms of what we have been able to do is that we have refocused the business as an investment business that is socially responsible and one that is responsible to its shareholders. We have watched our profitability grow, though our revenue has not grown because revamping has not taken place. We have had a situation whereby in our first year, we could turn out a profit that is 53 per cent higher than what we met, though we were not growing turnover. That was what permitted us to pay those dividends; that was cash out of the business. N167 million flowed out of the business to our owners and this year, they will not expect the same amount but something higher. So, we have been able to refocus the business to say this is a business and we must run it as one. That is why we are doing all these studies and some of them will be completed, like the Cocoa Industry and we will keep them on the shelf; we would not just run into the businesses because we were doing them before. If we do that, you know what will happen? First, I will sack myself and I will leave a deficit behind. That is not what we want to do, we want to leave a legacy of endurance and sustainability.


Balancing the interests of the owner states

Part of my job today is managing my owners in a way that when they see me, they do not see a politician. I do not belong to any of them and I belong to all of them. My actions at any given time are based on business principles. There is an advantage in that, because when the pressure comes, one can always ward it off by playing fair. I have been playing fair; the governors belong to two parties at this point in time and I am a friend to all of them. I am serving them and making sure that equity applies to everything we do. It is difficult, because some of them even say it is a lie, that it is not possible for me to serve more than one master, but I always say that this is a business and in all we do, we always use the business perspective. But we are aware of our social responsibilities and they must be underpinning the decisions we take in terms of impacting our people. So, we will not just use business decisions, we will be socially responsible and ensure that we are not digging a hole for ourselves or sabotaging ourselves and that is why the risk mitigation and governance framework are important in the way we do things.