Interview with Mr. Bayo Osibo, (EX ) Chief Executive Officer of Portland Paints & Products

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Tell us the background about the creation of your company, the history, and some milestones.

Portland Paints and Products started off as a small division of a larger manufacturing company, called West African Portland Cement (WAPCO). It was incorporated into a limited liability company in 1985, becoming a wholly-owned subsidiary of WAPCO. WAPCO went through an ownership change from part-ownership by a British company called Blue Circle Industries, to majority-ownership by a French company called Lafarge, who decided to concentrate on core business, which meant that this division had to close. The company was disposed of through a Management Buyout in 2004, and I led the team of five management staff that took it over. The MBO Team had limited funds, but we had the support of a British Private Equity company, Aureos West Africa Fund. They gave the financial support needed to fully take over the Company and we were able to further develop it, and build it to where we are today. We had our fair share of challenges along the way, going from having to borrow funds, through running a heavily-indebted business, to becoming a leader in the Nigerian paint industry. Since then we have continued to grow steady, and in 2004 we were listed on the Nigerian Stock Exchange.

What is the core business of Portland Paints and Products, and what are your competitive advantages over other Nigerian companies in the sector?

Portland Paints stands for the main part of our activities and the ‘’Products’’ stands for everything else. Our core business is paint manufacturing and marketing, and this activity delivers the bulk of our revenue. Portland Paints has the widest range of paint products in the Nigerian market. We specialise in high-quality, durable external finishes. Our paint products are legally-guaranteed to last 5 years.

We are the most diversified paint company, as we do many other things beyond paints. To define this company, we represent the world’s leading bathroom manufactures, Armitage Shanks and Ideal Standard. We have affiliations and relationships with many foreign companies whom we represent, for example, we are the leaders in the supply of protective finishes to the Oil and Gas Industry, with our Hempel’s protective finishes. We represent Hempel’s of Denmark, and also manufacture or add value to some Hempel bases, under the Local Content initiative of the Federal Government. We are pioneers in changes to the paint industry from new products to technology change. We manufacture of an Instant Road Repair material, for patching holes and cracks on the roads. This product is unique as it can be used at any temperature. While many other materials are used at specific temperatures for best results, this comes cold and is ready to use.

The competitive advantage we have over other Nigerian companies is our diversification, and the quality of our products. We are the only company that offers a legally-enforceable guarantee on the quality of our products. Our external paints are the best and we are proud to say that if our paints fail on your walls within a five years period and we don’t replace it free of charge, our customers can seek their rights in a court of law”. Not many other manufactures can say that. We are the leaders in quality and range. In Volume, Turnover and Profitability, but we are still in the top three paint companies in Nigeria.

Tell us about your future plans and where you see Portland paints in 2 to 3 years’ time and how important is the contribution of foreign partners to Portland paints.

Over the next few years we want to focus on making our processes more efficient, and increase our speed to the market. We have a factory in Ewekoro, Ogun State, from where we have products distributed all over the country. This, however, has its own challenges because of the failing infrastructures and inefficiencies in the country. We are trying to create a system where we become more productive in the process of manufacturing and distribution. To do this we don’t want to do all our manufacturing in the factory, which in some cases, take up to 5 days to reach point of sale in some remote locations. During which time our customers may find other products that are more readily available. We are introducing a technology that will finish the product at the point of sale. This technology will make us more consistent in quality and provide instant delivery, and overall, we will have more satisfied customers. This technology is able to produce as little as 1 litre at a time, therefore even you just need to cover up a scratch we will be able to supply you.

We also plan to grow some of our non-paint activities into stand-alone companies.

Aureos, our foreign partner did not just help us to acquire the company and grow it. They added more value to us by using their resources all over the world to enable us take advantage of whatever opportunity came our way. They have assisted us with training and with capacity development, and they have done all these without being part of the day to day management of the company.

Manufacturing itself contributes to less than 5% of GDP, what do you think the main challenges are in this industry to capitalize on its potential? The major challenges in any sector in Nigeria are infrastructure and security. Other challenges vary with sector in which one operates. However, in paint manufacturing, our main challenges range from having to import our raw materials, through the cost of the manufactured product, to a very depressed domestic market. A lot of our major raw materials are derived from the petrochemical industry. In the developmental plan of the Nigerian petrochemical industry, our kind of materials will be produced in the 3rd stage of development. Nigeria has remained in the 1st stage of development in the 30 years that I have spent in the paint industry, so it’s not clear when we shall be able to manufacture key paint raw materials locally. Importing raw material has its own difficulties, with regards to foreign exchange, difficulties at the ports and the lead time. We have to make sure we don’t run low on our supplies, which also leads to the need for a considerable amount of capital. Whereas access to capital is very limited and you have a very low domestic demand, the situation is very pathetic.

The paint industry is very closely associated with the construction industry; the construction industry itself is such that if the government isn’t building, very little appears to be going on. Therefore, it is indirectly linked to government activities. The government is the biggest spender in the construction industry. The private developers don’t contribute enough as they look for government funding or to the mortgage institutions, which themselves are government regulated. On the scale of needs of the average Nigerian, painting and maintenance is really not a priority, thereby depressing domestic demand.

Having said all that, all hope is not lost. There are still lots of construction to be done in Nigeria, if we are to have a good standard and quality of life. With the growing of the urban population and the emerging middle class, we can see room for improvements in the coming years. There is acute need for more homes, more institutions like schools, hospitals, police and military barracks, more roads and bridges, etc. We need to continue to grow and come to an expectable level of development, and this gives hope for increased domestic demand for paints.

How important is it for Nigerian companies to downstream there activities, and add value across all sectors? For example, you have to import most of your raw materials and even petrol products, even though Nigeria is one of the largest producers of oil in the world.

I believe this is very important to the Nigerian economy, not just in oil but also our natural materials, a lot of which we have. We need to use our natural materials and turn them into resources of value. I think as a nation we have become very short sighted. We came from a situation where we didn’t have much money but had acceptable level of development, and things worked. This was under the British government culture of doing business. After the British left and we discovered oil, the income from the oil became the main focus, and other sectors were forgotten. Corruption followed, and other sectors were forgotten. That’s why there is no development in spite of all of our natural recourses. Another problem that has inhibited development is the regulations. The country’s constitution has a long list of items that are the exclusive preserve of the Federal Government to deal with. These include a lot of infrastructure like roads, the railways, development of mineral resources, and until recently, power supply.

With all these challenges that you have mentioned, how would you convince an investor to coming to Nigeria and partnering with you?

In spite of these challenges Nigeria still has a lot to offer and has great opportunities for investment. Due to the low level of development, there are opportunities to add value to many different sectors from technology transfer in industries, to road construction, housing development, development of the power, transportation and communication sectors, and many other things. With a population of about 160 million people, the market is virtually virgin, and guaranteed for any product or service. In spite of all the alleged dangers in Nigeria, with the inconsistencies in policy and corruption, any investor can still come here, do honest good business and make good profit. The Federal Government is now developing the power sector which has been going through many different problems, and there have been disappointments. Everybody is beginning to realise that our policies and laws hinder development and we need to make changes. The sector is being unbundled and privatised, and the private sector can develop their own power needs. All of this will add value and within the next 2-5 years we would have solved the power issue, as we did with Telecommunications.

If you partner with Portland Paints and Products we will provide you with the local environment and show you the different procedures and policies you need to know in order to do business successfully in Nigeria. We come with best practices and already have strong partnership with foreign companies. We were the first Nigerian investment of our British equity partner. Even though they entered the investment with a lot of fear and apprehension, they are very happy that they did. Between 2004 and now, they have become the biggest private equity company in Nigeria, and have invested in about 26 companies, some from which they have exited with good profits. They are very happy with their decision to partner with us.

You have worked in this company for around 28 years, what legacy would you like to leave behind?

I would like to leave the legacy of hard work, dedication, focus and being innovative. We are where we are today due to working hard, not losing focus and not giving up. When I joined this company, we were a small division, which we incorporated into a small subsidiary, of a bigger company, in a totally unrelated activity. The road had been very rough and narrow. Nigerian banks don’t support the manufacturing sector, which makes it all the more difficult to develop as a manufacturer. Therefore invest in the most essential and indispensable items for growth. You have to make the best of any situation and that is what I have done with Portland Paints & Products, with God being the guide.