Berger eyes oil and power move

• Construction company in diversification drive

Julius Berger Nigeria, the largest construction company by market value in that country, plans to acquire oil assets and expand into the power industry as it seeks to diversify its business and stay competitive after the Nigeria’s worst economic slump in decades.

Julius Berger Nigeria, the largest construction company by market value in Nigeria, plans to acquire oil assets and expand into the power industry as it seeks to diversify its business and stay competitive after the country’s worst economic slump in decades.

The Abuja-based company, which derives two-thirds of its earnings from government contracts, was also considering bidding for business in other countries in the region, such as Ghana, Benin and Ivory Coast, where it had conducted market studies, MD Wolfgang Goetsch has said.

“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.”

Julius Berger’s earnings fell as Nigeria fell into its worst economic slump in a quarter century amid lower oil prices and a shortage of foreign exchange. Julius Berger had been “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, Goetsch said.

“This was very difficult, it still is. It was a struggle to survive,” he said.

“It is now much better, if you look at the statistics. The gap between the central bank rate and the parallel market window is much smaller now and availability is much better.”

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 contracted in 2015.

The stock fell less than 1% to close at 43.70 naira in Wednesday’s trading in Lagos.

It has gained 13% in 2017, compared with the 25% surge of the Nigerian Stock Exchange main board index.

The company said on June 19 it had formed a partnership with Petralon Energy to work on oil fields in the Niger River delta.

It was in talks with about eight power industry investors to build generating plants, Goetsch said. Negotiations for new projects were now mostly about agreements on the foreign currency component of the contracts, Goetsch said.

“Eighty percent of the negotiation is just to find an agreement on the currency, which in the past was a minor issue and one of the last points.

“Now it’s always the first point because this is a risk that really can kill a company.”

The move by the Central Bank of Nigeria to ease currency controls and open a marketdetermined trading window had brought some stability to the foreign exchange market, even if it was temporary and probably unsustainable in the long term.

“I don’t think that this can be the permanent solution,” Goetsch said.

“Maybe it’s just a bridging solution, because at the end I think there is one dollar and one naira and there must be one rate.”