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Two days ago, AllNews disclosed that Chemical and Allied Products Plc (CAP) is planning to absorb Portland Paints, while the acquisition is still subject to regulatory approval, findings have shown that recent financial crisis on the part of Portland Paints could have influenced the company's decision to give up its assets to CAP.
The company which began as a small division of West African Portland Cement (WAPCO) before growing into a standalone company in 2004, then get acquired by UAC Nigeria in 2013, is now heading towards another acquisition - but this time, Portland Paints brand will no longer exist, as CAP will be absorbing it completely (if approval is given).
The paint market in Nigeria has been highly competitive with individuals or building painters now creating their own paint. This has reduced the reliance on major brands' high-end products, as low income houses favour small business paints due to its affordability. This has cut into revenue of major brands like Portland Paints, which is rivaled by notable brands like Berger Paints, Dulux, President Paints, Meyer Paints and Eagle Paints.
According to the recent earnings of Portland Paints, the company is going into the deal from a weak spot, as revenue has been on a decline since 2019. The company's revenue sources are from Sandtex Paints, Crown Trade and Hempel, all of which involves Decorative paints, Automotive and industrial Paints, Marine and Protective Coatings and Sanitaryware.
In the recent financials of Portland Paints, the company's revenue dropped by 18% in the year ended 2019, as revenue for the period, which was reported as NGN2.61 billion, failed to surpass the NGN2.82 billion generated in the corresponding period of 2018, while profit grossed for 2019 full year slumped as well, hitting NGN960.73 million, far below the NGN1.07 billion of full year ended 2018.
The decline has continued into this year, AllNews observed. In the first quarter of 2020, Portland Paints revenue fell drastically by -49.7% to NGN390.39 million, whereas, in the same period last year, Portland Paints had generated NGN777.35 million. Profit grossed for the Q1 2020 period also declined by -54.7% after it grossed NGN134.77 million, falling below the NGN297.7 million recorded in Q1 this year.
Portland Paints' Q2 2020 earnings wasn't impressive either, as the company reported a loss of NGN28 million for the period. Its revenue in Q2 2020 was NGN380.38 million, failing to generate more than it did in the corresponding period of Q2 2019, when the company generated NGN581.35 million; this reflect -34.5% fall in revenue. Also, grossed profit for Q2 2020 could only reach NGN126.01 million, performing below the NGN207.34 million of Q2 2019.
In the third quarter of this year, Portland Paints also recorded a loss of NGN40 million, according to the company's earnings seen by AllNews. It was gathered that Portland Paints' revenue fell by -28.0% in Q3 2020, after generating NGN457.92 million, which is below the NGN636.85 million generated in Q3 2019.
During the same period of Q3 this year, Portland Paints' profit grossed dropped by -38.0%, as NGN124.56 million was reported as grossed profit. This also failed to rise beyond the NGN201.09 million posted as Portland Paints' grossed profit for the period of Q3 2019.
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Portland Paints look set to continue on the decline path till year end 2020, following the trend in the recent earnings of the company. It's left to be seen how the acquisition of Portland Portland will impact on Chemical and Allied Products' earnings if the deal is approved by shareholders and regulatory authorities.
It was learnt that Chemical And Allied Products will takeover Portland Paints’ assets, liabilities and business undertakings including real property and intellectual property rights. Meanwhile, shareholders of Portland Paints have been offered NGN2.90 kobo cash for every Portland Paints share held or receive 1 new ordinary share of CAP, credited as fully-paid up for every 8 Portland Paints shares held, the statement reads.
Regardless of the offering price to Portland Paints' shareholders, to acquire the company, the deal will have to be approved by the Federal Competition and Consumer Protection Commission, the Securities and Exchange Commission, the Nigerian Stock Exchange (NSE) as well as shareholders of CAP and Portland Paints, respectively. The Proposed Merger is also subject to the sanction of the Federal High Court.
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