Business
Thyssen hit by doubts $1.2 billion fundraising is enough
FRANKFURT – ThyssenKrupp has raised 882 million euros ($1.2 billion) in a sale of new shares, less than some analysts think it will need to pursue a turnaround after it failed to sell a loss-making plant and was forced to take back two others.
The fundraising saw activist shareholder Cevian lift its stake to over 10 percent, sources familiar with the matter said, which could step up the pressure on Germany’s largest steelmaker to consider a bigger shake-up, such as more asset sales.
ThyssenKrupp, which has suffered three straight years of losses and racked up debts, is trying to move away from a bulk steel market hit by weak economies and overcapacity to more profitable products such as elevators and factory components.
But the group has struggled to extricate itself from its Steel Americas business and on Friday said it had only managed to sell its U.S. finishing plant, leaving it with a loss-making steel slab mill in Brazil. It was also forced to take back an Italian steel plant and an alloy unit sold last year.
“We think that the size of the capital increase is too small,” Metzler analyst Lars Hettche said, adding any new problems at the Brazilian steel mill or the re-acquired businesses could trigger the need for another capital hike.
ThyssenKrupp shares were down 2.4 percent at 17.21 euros by 0945 ET on Tuesday, extending Monday’s drop of 8 percent.
Its five-year credit default swaps (CDS) rose 4.2 percent to 243 basis points, according to Markit data, increasing the cost of insuring the company’s debt against default.
ThyssenKrupp, long viewed as a symbol of Germany’s industrial prowess, placed 51.5 million new shares with institutional investors at 17.15 euros apiece. That was at the lower end of the 17.05 to 17.635 euros range they were offered at and a discount of 2.8 percent to Monday’s closing price.
The proceeds will be used to cut the group’s net debt, which stood at about 5 billion euros at the end of September, and reduce its gearing – the ratio of its net debt to equity. In September, the group had to secure a waiver from its banks after its gearing breached the 150 percent level that could have seen creditors prematurely cancel a 2.5 billion euro credit line.
Analysts said the share sale and U.S. deal should cut ThyssenKrupp’s gearing to just above 100 percent from 200.6 percent at the end of September. That is still far above 34 percent at world No. 1 steelmaker ArcelorMittal (ISPA.AS) and an industry average of 60-70 percent.
“The capital increase eases the pressure a bit,” said Thomas Hechtfischer of shareholder rights group DSW. “But it would be difficult to digest any more bad news.”
SHIFT IN INFLUENCE
The share sale also resulted in a shift in ThyssenKrupp’s shareholder base, giving more power to Cevian, which has so far backed management’s plan to sell non-core assets and cut costs.
Meanwhile, the Krupp Foundation, ThyssenKrupp’s top shareholder and widely seen as a shield against takeovers or a break up of the business, did not buy new stock, allowing its stake to be cut to 23 percent from 25.3 percent.
That means that the Krupp Foundation may have to hand over one seat on ThyssenKrupp’s supervisory board to Cevian, which prior to the fundraising had owned a stake of 6.1 percent.
Cevian declined to comment.
“I would welcome it if the Foundation’s stake shrank,” Union Investment fund manager Joerg Schneider, who holds shares in ThyssenKrupp, told Reuters ahead of the capital increase.
Some investors have criticized the Foundation for blocking more radical change at the company.
With ThyssenKrupp’s finances still under pressure – credit rating agency Moody’s reaffirmed its negative outlook on the company on Tuesday – some analysts said the group might have to consider more asset sales.
Baader Bank analyst Christian Obst said it could sell its components technology business, which makes car parts such as crankshafts and engine components, or could merge its steel trading business with its Italian plant to sell as a package.
But finance chief Guido Kerkhoff on Saturday brushed off speculation that ThyssenKrupp could sell any of its capital goods businesses, and analysts said the Krupp Foundation’s influence was strong enough to make a break-up very difficult.
DRAIN ON FINANCES
On Friday, ThyssenKrupp agreed to sell its U.S. plant in Alabama to ArcelorMittal and Nippon Steel & Sumitomo Metal Corp (5401.T) for $1.55 billion, the low end of expectations and leaving its Brazilian problem unresolved.
A supply agreement for the Brazilian mill, part of the U.S. deal, guarantees at least 40 percent utilization for the next few years, but analysts said there was so much excess capacity in the market that business would remain tough.
ThyssenKrupp’s Steel Americas business cost it almost 13 billion euros in investment and losses over six years, after plans to produce cheap slabs in Brazil and ship them to the United States to make products for cars fell apart when Brazil’s currency rose and demand for vehicles slowed.
The German firm was also forced to take back a steel plant at Terni in Italy and an alloy unit sold to Outokumpu, as the Finnish steelmaker – trying to overhaul its own finances – returned them in exchange for cancelling a 1.25 billion euro loan ThyssenKrupp gave it to finance a wider deal.
The businesses will require investment, further draining ThyssenKrupp’s finances. Analysts say the Terni plant is loss-making and needs to be restructured, while the alloy unit, though profitable, is declining.
– REUTERS
The need for stronger regional collaboration, government-private sector synergy, and innovative market solutions to unlock Africa’s economic potential has been brought to the fore.
Group CEO of the Nigerian Exchange Group Plc (NGX Group), Temi Popoola, shed light on the transformative potential of Africa’s capital markets at the launch of the Ethiopian Securities Exchange (ESX).
The NGX Group’s strategic investment in ESX underscores its leadership in advancing Africa’s capital market infrastructure. “The launch of ESX represents a pivotal moment for Ethiopia and the broader African financial landscape,” Popoola stated. “ESX will serve as a crucial mechanism for capital formation and market liquidity, driving sustainable economic growth.”
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Expounding on NGX Group’s investment rationale, Popoola highlighted Ethiopia’s immense market potential and the shared vision of fostering economic growth through innovation. “Our partnership transcends traditional investment parameters,” he explained. “It is about ensuring that ESX evolves into a key player in Africa’s financial ecosystem, enabling cross-border investments and setting benchmarks for market development.”
Popoola also drew parallels with global success stories like India, which has leveraged its capital markets to achieve significant economic transformation. He emphasized the importance of responsible market opening to attract local and continental capital. “By following this path, Ethiopia can become a financial hub in Africa,” he remarked.
Prime Minister Abiy Ahmed lauded the launch of ESX as a transformative milestone in the country’s journey toward economic modernization. “Today, we have officially rung the bell to launch the Ethiopian Securities Exchange, our nation’s first stock exchange,” the Prime Minister announced on X. “This is a call to global investors: Ethiopia offers immense potential, a fast-growing economy, and a clear trajectory toward shared prosperity.”
CEO of the Ethiopian Securities Exchange, Tilahun Esmael Kassahun, expressed confidence in the partnership with NGX Group. “We are pleased to welcome NGX Group as a strategic partner, building upon the existing support we continue to receive from them,” he said. Kassahun also emphasized the value of NGX Group’s expertise in shaping ESX’s growth and success.
Drawing from NGX Group’s six decades of experience, Popoola shared insights on diversifying financial instruments and expanding access to investment opportunities. “With the right mix of innovation, policy support, and regional collaboration, Ethiopia’s capital market can play a transformative role in driving economic development and establish itself as a leader in Africa’s financial ecosystem,” he concluded.
With the ESX poised to redefine Ethiopia’s financial landscape, NGX Group’s involvement highlights the critical role of partnerships and shared expertise in advancing Africa’s economic narrative.
The Office of the Auditor-General of the Federation has uncovered financial irregularities amounting to ₦514 billion in the 2021 operations of the Nigerian National Petroleum Company Limited (NNPC Ltd).
The revelations were contained in a comprehensive audit report highlighting non-compliance and internal control weaknesses within Ministries, Departments, and Agencies (MDAs) during the 2021 financial year.
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Breakdown of Infractions
The audit detailed four major financial discrepancies within NNPCL:
“Irregular Deductions: A total of ₦343.64 billion was deducted from domestic crude oil sales at source without proper documentation.
“Sinking Fund Deposits: ₦83.66 billion, categorized as miscellaneous income, was retained in a sinking fund account.
“Unauthorised Refinery Deductions: ₦82.95 billion was deducted from federation revenue purportedly for refinery rehabilitation.
“Unsubstantiated Payments: ₦3.75 billion was flagged for transactions related to petrol sales that lacked proper verification.
The Auditor-General’s report stated that these financial activities violated the 1999 Constitution and the Financial Regulations Act of 2009, underscoring significant lapses in compliance with statutory guidelines.
According to the report, NNPCL generated ₦484.73 billion from domestic crude oil sales in March and May 2021.
However, ₦343.64 billion was deducted for various purposes, including “Value Shortfall,” “Strategic Stock Holding Cost,” and “Pipeline Maintenance.”
The deductions were made unilaterally by NNPCL without adequate documentation or justification.
Additionally, the report flagged ₦50 billion of the net payable amount for May 2021 as unaccounted for, creating a significant gap in the federation’s revenue.
“Audit observed from the review of NNPC SAP payment record for March and May 2021 payments that the sum of ₦484.73bn was the gross amount generated for the sale of domestic crude for the months of March and May 2021.
“The sum of ₦343.64bn from the gross amount was unilaterally deducted from the gross domestic crude sales as NNPC Value shortfall, Strategic Stock Holding Cost, Crude Oil and Products Pipeline Losses, as well as the pipelines maintenance and management costs.
“The details of each of the cost components deducted were not provided for audit review. Hence, the reasons for the deductions could not be justified by the management.”
On the unremitted ₦50 billion from May 2021, the report noted: “In the month of May, the net payable that could have been remitted ought to have been ₦127.075bn, but only the sum of ₦77.075bn was remitted, leaving an unremitted balance of N50bn to the Federation Account, which has remained unaccounted for.”
The report attributed these anomalies to weaknesses in NNPCL’s internal control systems, warning of the risks they pose to public funds.
It read, “The above anomalies could be attributed to weaknesses in the internal control system at NNPC, now NNPC Ltd. This is a potential loss of Federation revenue, diversion of public funds, or misapplication or misappropriation of funds.”
The success of the maiden edition of the Lagos Shopping Festival (LSF), Africa’s first 72-hour non-stop commerce and entertainment event has been credited to the Governor of Lagos State, Babajide Sanwo-Olu.
This is the view of Managing Director/Chief Strategist of Chain Reactions Africa Ltd, Israel Jaiye Opayemi, one of the main organisers of the event.
According to Opayemi, though Chain Reactions Africa conceptualised the event, the festival could be rightly described as the Governor’s baby and owes its success to his leadership. “Firstly, the Lagos Shopping Festival could not have come to fruition if the Governor did not buy into our audacious plan when we first presented the idea to him during the Covid-19 pandemic in 2020. Secondly, it was the Governor’s exemplary leadership of the project as its Chief Marketing Officer which attracted the buy-in of key sponsors like Zenith Bank, Tolaram Group, First Bank Plc, and Guinness Nigeria Plc,” Opayemi revealed.
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While the duo of Zenith Bank and First Bank provided their bank on wheel platforms for buyers at the Lagos Shopping Festival, they also supported the Vendors with special Point of Sale Machines with which to process payments from buyers. The banks were also seen marketing their diverse banking products to guests within the shopping arena.
For Tolaram, it was a time to support the citizens and give back to society. Guests at the Lagos Shopping Festival were freely given some of the products of the group such as PowerOil, Indomie and Kellogg’s packaged into goodie bags and given out to prospective buyers at the shopping arena. The Children’s Arena was however activated by Indomie with the children entertained by Santa Claus within a well-equipped arena manned by the Indomie Brands team and the Lagos State Safety Marshalls. The children were daily treated to free Indomie meals daily and given various gifts to go home with.
On its part, Guinness Nigeria came through as the real life of the Nigerian party by organizing product sampling activation for the teeming guests at the festival using brands such as Singleton, Johnnie Walker, Ciroc, Don Royale and Captain Morgan to deliver pleasant experiences to guests aside from Guinness and Malta Guinness.
While unveiling the identity of the festival last month, Governor Babajide Sanwo-Olu had thanked the management of Zenith Bank Plc, Tolaram Africa Group, Guinness Nigeria Plc and First Bank of Nigeria for supporting the idea of a Lagos Shopping Festival, describing it as a value addition on the state’s tourism calendar and the overall efforts to grow the State’s GDP. The Governor further said, “I must specially acknowledge your pioneering sponsorship role. It is easy for a corporate sponsor to jump on the sponsorship band wagon of an already established festival and fund it. But you are supporting the maiden edition of this Lagos Shopping Festival with us. The competition is watching you now. Do not build this brand with us and yield the space for the competition to take over. I do hope you would all commit long term to this brilliant initiative.”
On his part, Girish Sharma, CEO Guinness Nigeria Plc, expressed enthusiasm for the initiative. “Lagos is the commercial heartbeat of Nigeria and Africa’s entertainment capital, and the Lagos Shopping Festival captures its essence. We see opportunities in this initiative because it is a creative fusion of commerce and entertainment. This partnership reflects our dedication to fostering economic opportunities and support the nation’s vibrant entertainment industry.”
A first-of-its-kind, the festival was a convergence of commerce and entertainment, bringing together buyers and sellers in the MSME ecosystem, and hordes of fun-seekers who were entertained with thrilling performances by A-list entertainers, including Adekunle Gold, Wande Coal, Teni, Young Jonn, BNXN, Ayo Maff, SB Live and EmmaOMG. The list also included some of Nigeria’s most sought after DJs such as DJ Neptune, DJ YK Mule, DJ Baddo while Gbenga Adeyinka the 1st and Larry J dished out rib-cracking comedy performances.
Held from 23rd to 25th Day of December 2024, at the iconic Mobolaji Johnson Arena, Onikan Stadium, Lagos, the Lagos Shopping Festival saw thousands of fans throng the main venue and select Lagos malls during the three-day period to bag the latest bargains from local and top global brands.
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