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7-Up spends N2.2bn on debt servicing

By on October 12, 2013

7-Up Bottling Company will spend as much as N681 million in 2013 in pursuing outstanding court cases, even as it spent N2.26 billion in servicing different banks’ loans in the year ended 31st March, 2013.

This is contained in the company’s 2013 Annual Reports and Accounts.

The amount to be spent on litigation, according to information available in the report, is about 1.3 percent increase over N672 million expended in the corresponding period of 2012.

According to the report, “The company is engaged in lawsuits that have arisen in the normal course of business. The contingent liabilities in respect of pending litigation and other claims amounted to N681 million as at March, 2013 (2012: N672 million.)”

The report also revealed that 7-Up has an unsecured loans totaling N25 million with key management personnel as at the end of March, 2013, same as 2012.

Though the company stated in the report that it is not expected to suffer any material loss arising from the claims, shareholders at the 54thannual general meeting warned against impact of such litigations, saying that it is eroding the company’s earnings.

Speaking on behalf of other shareholders, Mr. Godwin Anono, President, Standard Shareholders Association of Nigeria said that N681 million is as much as annual turnover of some companies in Nigeria, while calling on the management to look for a way of ending those cases.

He said, “Let’s know the kind of people we are doing business with; we can’t keep wasting our resources on court cases when we need money to grow our business. It is a whooping amount. We should identify the source of the problem and deal with it immediately.”

The duo of Peter Okoh and Gbadebo Olatokunbo also cautioned the company against over-dependence on bank loans to fund its business, saying that something should be done about the company’s borrowings.

“The last time we approached the capital market for fund was in 1996. We cannot continue to work for banks; it is not advisable. We should look for a way of raising cheap fund,” they said.

Earlier, the chairman, Faysal El-khalil, said that continuing high prices of key manufacturing inputs had significant impact on the operating margins during the year. However, “With the help of aggressive sales and marketing initiatives, we were able to grow the volume significantly in the second half of the year and mitigate the impact of sluggish sales and price roll back in the earlier months,” El-khalil stated.

“I am pleased to report that despite many serious challenges the company faced during the year under review, it has been able to achieve satisfactory results. This improved performance is a reflection of the capacity investments the company has been making and the operational efficiencies and cost-saving strategies implemented by the management,” he added.

 

 

 

[Vanguard]