Housing Brands Will be Challenged in H1 2015

Nigeria building and construction brands edged up with the introduction of new technology, models and designs recently released on the market. In this interview, the Managing Director/CEO of Nigerite, Mr. Frank LeBris explained what the new normal in the market is and the macro-marketing dynamics that will define the sector in first half of the year and in the future. Excerpts;

What is Nigerite bringing to the ‘table’ of the market?
First, we bring to the Nigerian market a model and a new product combined. The designs on the product are smoother and more elegant. It is easy to point and nail and one of its best advantage is that you can bend it. Nigerians like specific designs, which are good and it is lighter than the former PVA. So, it is easier to handle by professioonals now. Secondly we have the whole house as an offering now.
How has your company been able to evolve over the years considering that competition has recently been springing up?
This industry is much more than installing machines and running them, it is also about improving the processes. So, the engineering of Etex (our major shareholder) did a remarkable job to run our machines for about ten years (1995 and 2005), and that improved the efficiencies of all our machines, our work systems and the processes around it. We are also committed to a high level of safety in our factories. Although we still have few accidents unfortunately, but we are now moving for the highest standard of safety, the European standard of safety (ECC), for our machines. So, we will have the safety competitive edge with our new safety equipment by the end of this year. We have moved from those machines we used in the 60s and 70s to more modern machines. The last investment was done in 2008, it’s a step by step and kalsi is a great improvement. We are entering into a new market and the new market we want to emphasise on is the non-residential market like offices and commercial malls; all that market were not open to Nigerite because of ceils and roofing sheets. We were and still more dedicated to the diverse market since 1995, but with this new brand we will be able to extend our activities to office segment.
In view of the market and the new product, do you have the capacity to meet up with demand?
At the moment we cannot meet demand. We have plans to multiply our capacity in the next 10 years.
So what is your present capacity?
Our present capacity is about 20 million square metres per year and the market is so huge that we should be able to multiply to 40 million. But you know in this business it is a matter of return on investment. You want to be sure that the money you invest gets back, and because it is a new product, our first time with kalsi, I’m sure we will be successful and then we will expand and have new machine to extend the capacity.
So what is your current market share?
We now have two categories of products, in roofing we have 30 per cent and in ceiling, we have 50 per cent.
In the roofing category, what is the advantage of the crater roofing over the corrugated iron sheets?
There’s no noise in the crater models, the insulation is very high and its good for human health and its life span is for life except you want to change because of fashion.
Are your raw materials locally sourced and are there challenges in getting them?
Mainly the raw materials are locally sourced. Cement, sand, and celluloid are locally sourced in Nigeria. It’s only fibres that are imported. There is no problem of validity because it’s an advantage to have Efex as a stakeholder. Efex group is the biggest supplier of this kind of fibre in the world, so we have a kind of central purchasing unit based in Europe buying for all the subsidiaries.
We still have challenges at the ports, sometimes we could have delay in vessels or bureaucratic problems at the ports. I appeal to government to help us with some waiver. We are fast-tracking that and there’s room for improvement.
What is your assessment of Nigeria’s business environment?
The market environment is good for us as a company because Nigeria has a housing deficit of between 16 to 17 million. So, I should say the market environment is very good, but there are some macro factors that are not favourable and especially this year, because of the present political environment, we expect lower sales in February and maybe in March too. This is because most times people wait a bit before the elections before spending money. So, business in Nigeria is a bit of a question mark and I see it remaining so for the first half of this year.
How has this affected the performance of Nigerite as a company?
Although it could affect us, but at the moment, it has not affected the performance of our business. It would only affect us because some customers will wait a bit before buying. So, it would affect our turnover for one or two months.
Naira devaluation means that cost of production would increase. How do you hope to cushion this effect on the final consumer?
The commitment of Nigerite is to provide very good quality of sheets at a good price. So, I will say the decision at the moment is not to pass the burden to the customers; as a company we will bear the cost differential. This is to say that we will cushion it at our own cost, that is to say that customers should not expect a price increase for the first half of this year.
How do government policies encourage your company?
I don’t see any encouragement of the government for us, but I see some encouragement from our partners such as Manufacturers Association of Nigeria (MAN), Lafarge Africa, and other local partners.
Could that be inferred to mean that government policies are not favourable to you?
It is not because they are not favourable, what I know is that government wants to encourage local content and technology transfer which are in tandem with what we are doing already. But we would appreciate if we have more financial support for example. At the moment we don’t have such. I would say that is one of the supports we could benefit from, and also we are ready to contribute to team up with the government or with some private partners in order to build affordable houses. We had a CSR project in Abuja supported by the foundation of our mother company. It is a foundation founded by the shareholders of Etex group, which is the main shareholder in Nigerite. So, we build 24 small affordable houses in Abuja at affordable price of less than N 2million, which the people have a chance to buy at lower than N1 million due to subsidy from the government. So, we are waiting for that kind of support from the government and private partners.
How many bedrooms are those units of houses?
One bedroom, kitchen, simple. It’s the same pattern. We have four-by-24 houses which came a hundred houses.
How many states do you have housing partnership with?
We are in partnership with Osun and Ekiti States and we had talks with Ogun State. In addition to that you must know that Odua Investments, which include the five old western states except Lagos are our shareholders, Ogun, Osun, Oyo, Ondo and Ekiti, have five percent each. So, we should have a tight relationship with them. For Osun, the government is ready to listen to us and to team up with Nigerite. It should be encouraged and we should speed up the cooperation with these states.
What informed your investment in dry construction technology?
I would say it was its advantages, because it allows you to build new houses very quickly with this technology. Then, secondly, for Nigerite as a company, it makes for an extension of our operating scope because it takes us from being providers of ceiling and roofing products to a full provider of houses, that is, the walls, flooring and all the other parts needed in completing a house will now be provided by us. That’s why we introduced this new process that enables us to offer a “one-stop” provider for housing.
As a solution provider in the building sub sector, what solution would you proffer to housing deficit?
It’s to provide kalsi walls, a concrete surface for the floor, some kalsi partition and to use our corrugated sheets for the roofing. Of course, we need to buy doors, windows and plumbings, but for the rest we provide the full house. We cannot meet this deficit within a short time, but the dry construction system makes it possible to construct within a short time. So, with possible collaboration with the government and other agencies this will be achieved within the shorter time than the ordinary construction. That is the solution that we are bringing to the table. We can at least fill this gap within a relatively shorter time. Indonesia is a booming country like Nigeria. In terms of the number of inhabitants, Indonesia has already launched the kalsi. It’s a new process and in fact, they use the kalsi to build two types of walls measuring 2.4 metres by 1.2 metres and the thickness of 3.5 millimetres putting the two together. With that you can build a lot of houses at very affordable prices.
What is the comparative cost advantage of kalsi over the mortar and brick system?
We take into account everything. This is because the cost of building materials is slightly higher than the current materials we have, but thanks to this because you will save 30-50 per cent of the time to build a house. So, if you add it to the material link costs, the labour costs and other accessory costs, it will be cheaper than the current way of building houses.
At what point in construction can kalsi be deployed?
You should have a normal foundation of concrete, but all the rest from ground floor to the roof will be made of kalsi. You can use the kalsi board as the external cladding. Most of the people I saw in Indonesia and in a South American country have old houses as ground floor and they want to renovate the house. The best way to use kalsi is to keep the ground floor as it is, brick and mortar then you crash all the walls and replace everything with kalsi including the flooring. Then you can have a very nice, big bedroom or a small internal garden and everything in kalsi, it is lighter and it is a big advantage. I saw it in Indonesia. I’m talking about middle class. So, the first step is to start with kalsi and the next step is to have a full house for the upper class. In this case, 20 millimetres and then you have very nice external cladding. We have been able to copy some chalet in Canada and other countries to have a wooden effect.
How can an average person benefit from the kalsi dry construction innovation?
Firstly, we have a very good network of distributors. They are our main partners and we rely on them to explain the benefits and the way of using kalsi. We have another group of partners who are carpenters. We train the carpenters to explain the benefits of kalsi to a vertical exercise to use kalsi. So, this two population, the distributors and carpenters will help us spread all over the country. Lastly, our training team will not go all over the country, but to the south west first, the rural market to support the distributors and the carpenters and to explain the benefit of our product, and of course, to sell.
We plan a very intense action this year, but for the following year we will continue because the south west of the country is a big market. We are also in partnership with professionals like architects and builders and you know most of them are in places like Lagos, Abuja, Port Harcourt, Ibadan and the likes, but they have projects all over the country. Once we are in good rapport with them, wherever they go, they carry the technology with them. Another one is that we are also going to use the mass media extensively. Where we cannot get to, our radio and TV adverts can get, even newspapers, these are other means of awareness that we are planning.
In what way has Nigerite intervened in enhancing technology transfer?
We brought the auto calve. We did all the training and skills in Nigeria. Therefore, the technological transfer for us is to transfer the skills to our workers so that they will be able to handle more sophisticated equipment. So, that is the first thing. The second thing is the increase of local content. We will increase the number of suppliers because in the new system we have a new supplier for sand. So, we imported less because in the current process we import fibres from abroad, but in the new process, we will use less fibre. In fact, we are increasing local content of our product.
What is the state of your investment in a new plant?
It should be completed by the end of March. It’s a big investment, we are talking of an investment of about two billion naira. The main part of it has been provided here. So, we have also some equipment coming from Europe, China and Japan. So, it’s really an investment financed by Nigerite.
What’s the volume of your investment in Nigeria?
Let’s say 50 per cent for the one in Nigeria and 50 per cent for the equipment outside. We use state-of-the-art facilities at Nigerite. So, we pick the best from every country. We got something from China, Japan and Germany. We also asked some specialists to come from Germany and Spain to help us. Here, we have a lot of technical assistance from Nigeria.
Five years from now what should Nigerians expect from Nigerite?
Nigerite would be with higher market share in the building market and we would have a significant market share in the non-residential market. The long term market is 50 per cent. For Nigerians, my dream is maybe not in five years, but in 10-15 years. Nigerians will buy small sheets of one by one or two by two or in small quantities, to store it to prepare a ceiling, or roofing or to make their walls, Nigerians should go to distributors to get everything related to building a new house.