The South African Hotel and gaming group, Sun International said yesterday it had decided to exit Nigeria due to weak economic growth and clashes with regulators.
Group’s earnings in the country have plunged amid a weakening economy and a dispute involving the company’s local partners.
“The Board has decided to exit Nigeria and steps will be taken to achieve this in a manner that does not erode further value,” the company said in a statement.
Bloomberg reports that Sun International bought 49 per cent of the Nigerian Stock Exchange (NSE)-listed Tourist Company of Nigeria (TCN) 10 years ago, giving it part-ownership of Federal Palace Hotel, Victoria Island, Lagos, one of the main hotels used by businessmen traveling to the commercial capital. Earnings before interest, taxes, depreciation and amortisation (EBITDA) at the Nigerian operations slumped 58 per cent in the 12 months through June, Sun added in the statement. Occupancy rates at the property fell to 42 per cent.
“Federal Palace continues to operate in a difficult environment with the Nigerian economy facing a number of crises including the low oil price,” the Johannesburg-based firm lamented. The Islamist insurgency led by the Boko Haram group and a weakening naira also hurt trading, while an “ongoing shareholder dispute has frustrated all attempts to develop and improve the property,” the company further said.
Other South African companies to have left Nigeria include retailers Woolworths Holdings Ltd. and Truworths International Ltd., citing tough regulation and rising costs. Johannesburg-based MTN Group Ltd.,Africa’s biggest mobile-phone provider, agreed to pay a N330 billion ($957 million) regulatory fine in the country earlier this year, leading to its first-ever half-year loss.
Sun has been drawn into a “long-standing family dispute” between fellow shareholders in Nigeria, the company said earlier this year, after workers, including South African expatriates, were detained without charges by the Economic and Financial Crime Commission (EFCC). The employees have still not had their passports returned to them, while no charges have been filed against them or the company, Sun said.
Process of exiting Nigeria is likely to be “protracted,” as Sun seeks to ensure it receives fair value for the investment.
The hotelier said in May it plans to sell minority interests in properties in countries including Zambia, Botswana and Namibia for 394 million rand ($29 million) to reduce debt.
Shares were 0.4 per cent lower at 91.76 rand as of 2:02 p.m. yesterday in Johannesburg, valuing the company at 10 billion rand, according to Bloomberg.
The Sun, owner of the Sun City resort Northwest Johannesburg, said full-year diluted adjusted earnings per share excluding one-time items fell 20 per cent to 6.28 rand, while sales gained 15 per cent to 12.2 billion rand. The final dividend was cut to 1.35 rand a share from 1.75 rand the previous year.
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