DN TYRE & RUBBER PLC
Car Tyres
Mini Van Tyres
SUV Tyres
Trucks Tyres
Sport Tyres
Bus Tyres

PRESS PARLEY


UPDATES ON DN TYRE & RUBBER PLC


BACKGROUND


DN Tyre & Rubber Plc (formerly Dunlop Nigeria Plc) “(DNTR”) was incorporated in 1961 and began the manufacture of tyres at its Oba Akran premises in 1963. Over the years the company grew to become a hallmark in the world of manufacturing, producing the first tubeless car tyres in Nigeria and amassing quality awards for its products from both Nigeria and the European Economic Community. DNTR however became a victim of the decaying infrastructure in Nigeria and in the last seven years has been struggling to remain viable.


THE LIFE-CHANGING CHALLENGE
In 2002, in a bid to sustain its profitability and growth and to sustain its position as a leading tyre manufacturer, management took the decision to expand into production of the All Steel Radial Truck tyres. This led to the commissioning of its ultra modern factory in 2005 by then President, Olusegun Obasanjo. The factory was built for N8billion using funds from Banks and from some other investment of the Company which it called in for this purpose.


At the time the decision to build the factory was made, the tariff for imported radial truck tyres was 40%. By the time the factory was ready for commercial production at the end of 2006 however, this had been reduced to 10%. The effect of this reduction of tariff rate was that tyres produced in the factory (which factory itself was being run largely by privately generated power) competed poorly with the imported counterpart. This was the bane of the new factory and the reason Michellin took its exit from the Country at the end of 2006. Management has since 2006 engaged the government in discussions with a view to addressing the tariff issue. Though the government is listening to the Company it is yet to decisively act on the matter.


Meanwhile the moratorium period given by the banks for the facilities extended to the Company expired and repayment commenced and was being honoured. This however became increasingly difficult as the new range of tyres were not attracting the kind of popularity expected because its price towered above the price of imported tyres and the Company was paying more in financial charges than the market returns of both its current and new business could comfortably bear. The Company resorted to raising funds from the capital market in 2006 November to 2007 January to bring down its financial liabilities to a more manageable level and to raise some working capital which had also become rather difficult to amass.


The visit to the Capital market was a success. The Company had intended raising N5.5billion from the Capital Market and ended up raising N9.7billion. The entire amount was utilised as intended and the Inspectors from the Securities and Exchange Commission verified this. The factory continued to run but the money from the capital market did not affect the existing problem of “unfair competition” the company’s products were facing at the market place. To meet production cost their prices remained higher than that of imported tyres. Unable to wish away the problem and with the non-action of government it became clear to management that it had to drastically reduce the financial pressures on the business otherwise the company would collapse completely thereby further eroding shareholder value. As a result, on 31st December, 2008 the factory was closed down and the staff downsized accordingly.


EFFECTS OF CLOSURE OF THE FACTORY


1. Change of Name : DNTR had held the exclusive franchise to the Dunlop product brand in Nigeria. This was conditional upon it maintaining a Technical Know-How arrangement with Dunlop South Africa (now Apollo Tyres, South, Africa “Apollo”). Unfortunately with the cessation of manufacturing, there was no further need for a technical know-how arrangement with the Apollo. Apollo terminated its franchise agreement with Dunlop Nigeria. This led to the change of name of Dunlop Nigeria to its current name of “DN Tyre & Rubber Plc” .


2. Staff Down-sizing : The company had primarily manufacturing activities and so most of its staff were employed to work in the factory. With the cessation of manufacturing such staff became redundant and painfully, most had to be disengaged.


DNTR runs a contributory pension scheme and company-funded gratuity scheme. Before the enactment of the Pensions Reforms Act in 2004 (“PRA”), these funds were managed by a Trust Company it had incorporated. The Trust Company generally invested the funds in stocks and shares. When the PRA came into effect however the company in compliance with the Act began to pay pension contributions to an appointed Pension’s Fund Administrator (“PFA”) i.e. TrustFund Plc. It also appointed a separate PFA (i.e. ARM Pension Managers Ltd) to manage both the funds that had accrued to the pensions and gratuity fund before inception of the PRA. ARM also manages the post-PRA gratuity fund.

When staff were laid off after the factory was closed therefore, the Company negotiated a terminal package with their relevant Unions (under the watchful eye of representatives of the Federal Ministry of Labour & Productivity) and the agreed package as well as gratuity and pre-PRA pension that had accrued to each staff, which was outstanding, was paid to each in full. The Company continues to honour its obligation to staff that leave the system, through its PFA.


3. The EBID Loan: Just before the factory was closed down the company was granted a facility by the Ecowas Bank for Industrial Development (“EBID”) the purpose of which was to enable a re-tooling of the car tyre factory which was opened in 1990. This loan was yet to be drawn when the decision to cease manufacturing was made. It was therefore never drawn but was instead rejected as no longer necessary. The company even had to face some penalty for rejecting the loan.


MOVING INTO THE FUTURE – (NOT MOVING TO GHANA)
When the company ceased manufacturing, it ceased to do so universally and not simply in its Ikeja premises. The company is 100% Nigerian and while it recognizes the harshness of surviving in the Nigerian business environment it has no plans to move its factory anywhere else.


Rather, with cessation of manufacturing the Company is looking to revive its profitability and attain stability in the short term by trading in imported tyres. Its base remains its premises at Oba Akran Avenue, Ikeja from where it also continues to oversee its interest in its rubber producing subsidiary, Pamol Nigeria Ltd.


The manufacturing operations of DNTR had however run up a lot of debt for the company. This debt remained despite the cessation of that operation and DNTR is committed to paying it off in order not to jeopardize its new import trading business. The returns from the sale of tyres is not sufficient to meet these debts. At an Extraordinary General Meeting held on 22nd April 2009, the Directors informed the shareholders of its intention to sell-off the manufacturing assets that had become excess as a result of the cessation of manufacturing in order to pay off the company’s increasing liabilities to Banks (and other creditors). The Company has since embarked on this line of action. The excess assets put up for sale include land and buildings (in which the factories had been situate), plants and machineries.


The Company’s main creditors are aware of the Company’s plan for paying its debt to them and some are assisting by marketing the excess assets . Professional agents are also involved in the marketing of the assets.


EXTERNAL COMMUNICATIONS OFFICE
DN TYRE & RUBBER PLC
IKEJA, LAGOS


16th MARCH, 2010

y 28th January, 2008
[click here for Archives ]

About us | Services | News | Contact us Powered by Nigeria Net