Cap plc: An upcoming disrupter in the African paint market?

Change is the only constant in life, and one’s ability to adapt to those changes determines the person’s success in life. These are the words of American-born Benjamin Franklin several decades ago, and reflect the current efforts of Chemical and Allied Products (CAP) Plc to significantly grow its business amid a myriad of headwinds.

While the Nigerian paint industry is faced with unflinching obstacles and harsh operating environment, the paint-making subsidiary of United Africa Company (UAC) of Nigeria plans to create a solid base for its business by investing massively in information technology (IT), not only to overcome the challenges but also to deepen its footprint in the African marketplace.

CAP plc started the journey with a restructuring process in August 2019 which delivered for the paint maker a new leadership. Specifically, the Board of Directors of the company in a notice filed on the Nigerian Stock Exchange (NSE) announced the appointment of Awuneba Ajumogobia as a non-executive director and chairperson of the board; David Wright was appointed as the managing director; Udo Okonjo was chosen as a non-executive director of the firm.

These board changes came next after the appointments of Muhibat Omobolanle Idowu Abbas and Bolarin Okunowo as the firm’s non- executive directors.

Based on the profile of each of the new board members, it is apparent that they come from diverse backgrounds, but a unifying factor observed among them is the fact that all their experiences are linked to the business of CAP plc.

For instance, Ajumogobia is a Fellow of the Institute of Chartered Accountants of Nigeria and has more than 30 years of broad professional experience spanning several disciplines including finance, accounting, external audit, taxation, marketing, and business performance optimization.

Wright has extensive business and manufacturing experience with leading international paint companies, while Okonjo is experienced in the area of negotiating and advising on multi-million dollar real estate transactions on behalf of clients, including multinationals, listed corporates, privately held companies, and high net-worth clientele.

More so, Abbas possesses over 30 years’ experience in internal audit, financial accounting, management accounting, treasury management and pension fund administration, while Okunowo has extensive experience in debt restructuring and recovery for complex transactions most notably in the wake of the 2015 oil price crash.

No doubt, these impressive profiles as well as the enthusiasm and determination the new board members have displayed probably gave Wright the assurance that they “are going to create a company that’s going to grow significantly in the future.”

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CAP’S latest plans

In an exclusive interview with Businessday, David Wright said now that the new board is in place and perhaps hitting the ground running, the company will be investing heavily in the coming year which would probably begin to yield some significant gains towards the end of 2020.

The managing director mentioned some specific investment plans such as an upgrade of CAP’S IT systems to SAP HANA in the cloud. “This gives us access to our business systems and from any location, which means we can then implement Point of Sale data capture,” he said.

Besides this, there are plans to move to Microsoft 360. This AI model provides structure to the digital transformation planning of companies. Also, it creates a platform for businesses to engage in productive conversations with customers, optimise operations, transform products and services, among others.

The investment in IT structures will also be supported by some investments at the distribution end. CAP will be increasing the number of its Dulux colour sensors from 25 to 27 just before the end of this year. But that’s not all, its target is to add at least 12 more Dulux colour sensors in the year 2020.

“The focus is that we have a good product, we have a good top-of-mind recall for the Dulux brand, but at the end of the day, you’ve got to get the product in front of the customers,” Wright said. “We will be investing in distribution quite significantly and we will probably be investing significantly in Caplux, which is our second brand.”

Furthermore, the paint maker hopes to introduce some new functional products such as anti-mosquito paint, damp shield and anti-mould paints, both in its flagship Dulux range and the Caplux range.

All this attest to the fact that the coming years will see new products and services from CAP which are necessary for any Nigerian company planning to become a significant player in the African paint market.

However, it is not sufficient to introduce new products to become a major player in the continent particularly for a paintmaking company that only plays in the decorative range, it is also essential to expand its business geographically to reach out to more customers and increase sales significantly.

The paint maker has consistently grown sales over the past five years except in 2016 when the Nigerian economy slumped into a recession. From a turnover of N6.99 billion in 2014, the company made as much as N7.77 billion as sales proceeds in 2018, as its variant products enjoyed increased patronage. This is despite playing only in the highly-competitive Nigerian market which it’s yet to dominate.

“We first need to look at dominating the Nigerian market,” said Wright. “We intend to grow that so we become by far the major paint company in Nigeria.”

While CAP aims to lead the Nigerian paint market, there are plans to tap into the African market by exporting its Dulux and Caplux brands into its export territories in sub-saharan Africa before the end of 2020, and perhaps expand into other regions in Africa over the coming years.

It is evident that the future of this paint manufacturer looks bright as paints manufactured by the company are patronised by both everyday Nigerians seeking to paint their homes, as well as construction companies and real estate firms that build homes for commercial purposes.

The planned big-ticket projects in Nigeria, economic recovery in the real estate sector even though it still remains sluggish, and the passage of the 2020 budget, should have positive effects on the paints sector.

Also, the implementation of the African Continental Free Trade Agreement expected to become effective on July 1, 2020, might give CAP easy access to other territories in Africa in line with the goals of the pact.

AFCFTA aims to establish a single market for goods and services across 54 African countries, allow the free movement of business travellers and investments, and create a continental customs union to streamline trade – thereby attracting long-term investment.

CAP plc is the technological licensee of Akzonobel for Nigeria. It was established originally as Imperial Chemical Industries ( ICI) investments limited in 1957, but became ICI Nigeria Limited in 1965.

However, following the promulgation of the Indigenization decree in 1972 and 1977, ICI Nigeria Limited at first sold 40 percent, and then 60 percent of its share capital to the Nigerian public, and changed its name to Chemical and Allied Products Limited.

In 1992, ICI Nigeria Limited finally disposed of its minority 40 percent shareholding in CAP Plc when it sold 35.7 percent of its equity to UAC of Nigeria Plc. and the rest to the Nigerian public on the floor of the NSE. Currently, UAC of Nigeria Plc holds about 50.09 percent of the company’s equity.