Ellah Lakes Plc, an agricultural company listed on the Nigerian Stock Exchange, reported zero revenue for the second year in a row.

The struggling company posted a net loss of N893.9 million in the year ending July 2024, underlining the financial challenges it faces despite ambitious growth plans.

Meanwhile, CBO Capital, one of the majority shareholders, announced the sale of 81 million shares in the company.

CBO Capital transferred 81 million shares

CBO Capital, one of Ellah Lakes’ largest shareholders, has announced the sale of approximately 81 million shares, according to a recent statement seen by Nairametrics.

The shares were sold in two tranches: 79 million shares at N3.67 per share and another 1.4 million shares at N3.75 per share.

While the identity of the buyer remains unclear, this divestiture dovetails with CBO Capital’s previous announcement in July, when it signaled its intention to transfer some of its assets to shareholders and creditors to meet its obligations.

“We are pleased to announce that CBO Capital Partners Limited (“CBO”), the major shareholder of Ellah Lakes Plc, has transferred part of its shares in Ellah Lakes to its shareholders and creditors in a cross-agreement,” it said in a statement in July. “This trading move aims to offset CBO’s outstanding obligations to CBO Shareholders as well as fulfill the requirements of the Nigerian Exchange Limited (NGX) for the IPO of Ellah Lakes shares.”

This strategic divestiture is part of CBO’s efforts to increase liquidity in Ellah Lakes shares while meeting regulatory standards. By reducing its stake, CBO appears to be meeting both financial obligations and increasing the public offering of Ellah Lakes’ shares in NGX; It’s a move that could attract new investors looking for liquidity.

Ellah Lakes’ latest filing further reveals a significant change in shareholding structure. Following the sale, CBO Capital’s stake in the company fell from 28.2% in 2023 to 8.1% in 2024, leaving CBO with approximately 225.3 million shares.

The company’s total number of shares is 2.75 billion, with nine major shareholders controlling approximately 69% of the company’s equity capital.

Income difficulties and increasing expenses

The company’s financial performance continues to reflect significant operational challenges.

• For the year under review, Ellah Lakes declared zero revenue, reflecting the 2023 result. Despite the shortfall in revenue, the company reported a significant personnel expense of N591.4 million and administrative expenses of N297.7 million.

• Interest expenses on bank loans added another N147 million to the cost profile.

• The company’s debt obligations are also a concern. Ellah Lakes has a significant outstanding loan balance of N658 million with the Central Bank of Nigeria (CBN) and First City Monument Bank (FCMB), which is part of the N940 million loan under the CBN’s Oil Palm Plantation Development Programme.

• The fact that this loan is initially offered with a concession rate of 5% for the first year, which subsequently increases to 9%, increases the financial pressure on the company’s income.

Capital injection plans

Struggling with financial difficulties, Ellah Lakes is exploring options to strengthen its capital base.

• In March 2024, the company’s Board of Directors approved the process of raising funds through a private placement and subsequently notified the Securities and Exchange Commission (SEC) of the impending investment from a core investor.

• Although the transaction is still subject to regulatory approvals, this capital injection is expected to support the company’s liquidity position.

• This expected investment is seen as a vital lifeline for Ellah Lakes, which is struggling to generate income despite its high-cost structure and increasing debt obligations.

• The company has not yet provided further details on the identity of the investor or the exact terms of the deal, but the announcement highlights a strategic point to attract capital that could stabilize its operations.

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