Dangote Flour: How Price Of Bread Will Crash – Yakassai

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Our turn-around story — MD

In a twist of events Nigeria’s indigenous multinational, Dangote Group, bought back a subsidiary it had built and sold off. In this interview, the Managing Director of one of the foremost flour, noodles and pasta producer, Dangote Flour Mills, Alh. Ahmed Yakassai, explained what happened, the results and impacts.

By Emeka Anaeto

Dangote Flour Mills Journey

Alhaji Aliko Dangote

We are Nigerian company and we are grass rooted and know the environment, people and culture and we know what it takes to succeed in this environment. We are managing it in the Nigeria way and are succeeding.

Dangote Flour Mill came as a result of industrialization policy of the Group dated back to 1997, when we moved from trading business to manufacturing business. It was at that time that the Group President, Aliko Dangote, said enough is enough, and whatever they (foreign manufacturers) can do we can do it here.

And we changed the concept and idea of the business from an import based trading company to a manufacturing company. And Dangote Flour Mill happens to be one of the pioneer companies.

By 2001, the first mill was ready at Apapa, Lagos with a capacity of 500 metric tons per day. And today we are in Kano, Ilorin, Calabar with a combined capacity of over 7000metric tons of flour per day, and pasta and noodles also came in. In the journey, we sold Dangote Flour business to a South African company for few years. But expectations of the shareholders were not met.

They were not making money, and so Dangote Industries had to buy it back. We took it over in January this year. I will say that today the result is there for everybody to see. It is on the papers, stock exchange. We have moved from a loss making company to a profit company.

Internationalisation of Dangote Flour

We have got requests from our partners to come and set up in other countries. But internally, we have a lot of gaps to fill. Food security is our number one priority and so we feel that in the time being we would meet the local needs in all its entirety and then we would move out to set up plants outside the country. But now, the local demand needs to be met.

Competition

We are not bothered about competition because as a priority, quality products and customer service, are top on our agenda. We are producing the best quality. We are servicing our customers very well, we deliver to them at their door steps.

Jump in Income

We have moved the revenue in terms of production capacities and we have more than doubled our capacities in the last 6months, so naturally the revenue will increase. We are grass root rooted company, so we are there with our products before any other wakes up. If you check the numbers, you can look at the volume that was produced in the previous year, compared to what we’ve produced today, and you can look at the revenue that we have gathered within this period compared to last year. So it is basically having to bring to the table some wealth of experience in Nigeria where we are rooted, trusted and we are a known first consumer goods company and we will continue to give them the best of our products and services.

Profitability

Ahmed Yakassai

Yes it is as a result of this. As at September we moved from a loss of over N2 billion last year to a profit of over N5 billion. If you look at the Dangote Flour group it comprises of the flour, pasta and noodles. Some aspects of the group are just coming up the ladder and they are not exactly where we want them to be. Sometimes you allow this kind of things to happen so that you can reposition them and we are in the process of repositioning all the businesses to turn into good numbers, and that will happen; soon you will see it in the results.

Costs

We are doing everything possible to control cost as a challenge to management but this is basically related to other sectors of the economy. Increases in input due to exchange rate, it is really out of control in some cases, but we are doing our best at all times to make sure that we bring it to reasonable limit. It is also not limited to us and we are not all in all because we depend on other sectors.

Group support

I must say the support from the group has been tremendous and it is the support that has made us succeed beyond our expectations. They are there come rain come shine and they are making sure that we attain whatever level that we are today.
If I take you a little back, those numbers, if you look at our distribution cost, energy cost. When we started the year, we had a budget of N90 to a liter of diesel, but today a liter is over N200 and so you can imagine the impact. It is beyond what we can do. So while the Group sometimes goes with an import, some other times we have to go into the open market like any other company.
Some of the cost is as a result of the activities in the economy that are beyond us. And when those costs are controlled the profitability will be higher. Of course the product would have landed to the consumers at lower price than what it is now. I have to buy the dollar at the market price and not my own price and that translates to the selling price of my product.

Forex challenges

Despite everything I think the CBN and the government are doing very well in managing the situation. Of course it could be better. Definitely it is a difficult situation and you can see from all corners that they are doing everything possible to help industries and that is what should be the right thing to do.
For a long time we have been import based, but by the time everybody settle to the fact that we are a big country with such a huge market size, people would come and start to produce here. Even the spare parts and other things that we import are going to be produced here in Nigeria.
Government should invest in research and development and they should help people to grow wheat all over the country because wheat is 80% of our raw material. We have the land, water and human resources. Government should provide the right infrastructure and people will produce what we consume and even export.

Dangote Group backward integration

Within Dangote Group, for example, the sugar refinery, we are investing in plantations in Adamawa, Jigawa and other states, we are investing in sugar-cane production so that we would have enough raw materials to produce our sugar. The cement is an old history that we know very well that everything is now local. For the flour, through the wheat growers association all the flour mills in the country are investing money so that the association would be encouraged to grow more wheat. Along the line we will substitute the imported with local wheat. It is going to take some time, because it is not rooted in the people to grow more wheat.

Price of bread

As I said earlier, once we are able to address exchange rate, then what we are paying for the wheat import would be less and that would translate in the selling price of flour and by extension the price of bread in the market.

The second factor is that once we are able to grow enough wheat here in the country, it is not going to be 100 percent, maybe we need to blend with the imported higher quality to get the best quality, and naturally the cost of flour would come down and bread as well.

Competition from imports

Today officially there is no importation of pasta. But if you go round you would see it in the supermarkets, border towns gradually and slowly, it is getting into the market. It is an open secret. But officially it is not allowed. So we are encouraged and we feel that at a certain point in time, there will be a big stick that will say, you can’t even display it in the supermarket. We put our case to the government through the right channel and we know the government is listening and are doing something about it.

Message to stakeholders

It is a public knowledge that we have moved from a loss making company to a profit making one. At the last Annual General Meeting, the Chairman had told the shareholders what we are doing towards improving their lot. We are following through on this. In the stock exchange, everybody knew we were down to N1.00, but today we are over N4.00.

Next five years

In the next five years, Dangote Flour would be the number one flour mill in Nigeria. And not just in the baked flour business, but in all other sectors of bankable products, because in 2017 we are going to introduce three new products. We would come up with innovations that help their diet and already we are expanding our scope and we would be the number one.