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Tuesday, July 16, 2024

Julius Berger Nigeria diversifies to energy sector

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In Summary

  • Company’s move comes in the wake of economic downturn in Nigeria
  • Firm says plans to diversify into power and oil and gas or venture outside the country but only in core business
  • Julius Berger derives two-thirds of its earnings from government contracts

Construction heavyweight Julius Berger Nigeria is planning to diversify to the energy sector aiming to stay competitive in the wake of Nigeria’s worst economic slump in decades, MD Wolfgang Goetsch has said.

Mr Goetsch said that Julius Berger Nigeria the largest construction company by market value in the West African nation, plans to acquire oil assets and expand into the power industry.

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“Within Nigeria, we aim to diversify our business beyond our core competence of civil engineering, looking into power and oil and gas or to diversify outside the country but only in our core business,” he said. “We believe with strategic partners that we are more attractive to clients who want to have a whole industrial or power plant.”

Based in Abuja, Julius Berger Nigeria  which derives two-thirds of its earnings from government contracts, is also considering bidding for business in other countries in the region, such as Ghana, Benin and Ivory Coast, where it has conducted market studies.

In an interview Mr Goetsch said that the firm is experiencing is struggling to meet its financial obligation following a fall in earnings as Nigeria fell into its worst economic slump in a quarter century amid lower oil prices and a shortage of foreign exchange.

“Julius Berger was “really hurt” as it struggled to raise funds from the parallel, or street markets, to meet its foreign-exchange obligations and was forced to restructure and cut costs,” the MD said.

Julius Berger’s 2016 full-year profit of 3-billion naira ($9.2m) is more than 60% lower than the annual net income it earned in the three years before the economy suffered contraction in 2015. The stock fell 5% to close at 41.52 naira in Thursday’s trading in Lagos. It has gained 8% this year compared with a 23% surge of the Nigerian Stock Exchange Main-Board Index.

The company on June 19 said it had formed a partnership with Petralon Energy to work on oil fields in the southern, oil-rich Niger River delta. It is currently in talks with about eight power-industry investors to build generating plants, Goetsch said without providing details because the negotiations are still confidential.

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