Mechanical Lloyd Company Limited (MLC.gh) 2018 Annual Report

We have extracted below the Chairman’s Statement from the 2018 annual report of Mechanical Lloyd Company Limited (MLC.gh), listed on the Ghana Stock Exchange:

In 2018 the Government of Ghana steadfastly continued with the three-year International Monetary Fund (IMF) fiscal stabilization and Extended Credit Facility Program which began in April 2015. As widely acknowledged and reported, the program has led to tight government recurrent and capital expenditure control over the past three and a half years and is aimed at restoring the Country’s economic slippage over the period preceding the commencement of the stabilization program. The challenges associated with the program were (and are still) being felt throughout the nation.

The national overall revenue mobilization was below government target by 2.9% in 2018 (2017: -14.9%). The stock of public debt increased to GH¢172.9bn (from GH¢142.5bn in 2017). As a percent of GDP, total public debt increased to 57.9 percent in 2018, compared with 54.3 percent at the end of 2017, placing the Country at high risk of suffering debt distress once again.

The Bank of Ghana meanwhile continued with the restructuring exercise of the nation’s financial sector in general and the commercial banks in particular – which led to the reduction of licenced Banks from 34 to 23 by the end of the year. The effects of the restructuring exercise are beginning to impact the economy and will continue throughout this year and beyond. Against this background, the automobile industry as a whole struggled to grow. As a result, reduced pricing and promotions were necessary to move vehicle stocks.

FORD AND BMW DEALERSHIP

In 2018, Ford Motor Company (Ford) and BMW-ZA (BMW) embarked on a “Cluster/ Regional Hub Strategy” for the Sub-Saharan African market. The roll-out of these Strategies was “to achieve economies of scale and efficiencies, whilst addressing regional complexity and market volatility’’. This was to be achieved by grouping countries/ markets in the same geographical area as a block and assigned to one ‘Super Distributor/Dealer’. Ford and BMW have divided Africa into four (4) and two (2) clusters/ regions respectively and Tractafric Ghana Ltd. has been appointed the Super-Distributor for the cluster/region Ghana falls within.

Our Company has exclusively represented Ford and BMW in Ghana for many decades. Indeed, we Mechanical Lloyd PLC are responsible for the outstanding and enviable reputation (goodwill) these brands have enjoyed and continue to enjoy in our market. This has been done through the systematic investment in our people, construction of world-class office and workshop facilities, acquisition of modern equipment and the deployment of advanced automobile and communication technology. The planning, structuring and implementation of the ‘one Super-Distributor’ strategy by Ford and BMW was not shared with us adequately in advance as expected of our partners to enable us to prepare fully for and address its business implications and associated impact on all our stakeholders. The implications of this strategy on our business has been and continues to be enormous, throwing our 2018 budget and mid to long-term plans/commitments out of line.

MASSEY FERGUSON (MF)

In 2017 the Governments of Ghana and Brazil commenced with the implementation of the More Food Program (MFP) Phase 1 in Ghana. This is a cooperation aimed at strengthening the productive capacity of  small-scale Ghanaian farmers with one hundred and fifty (150) Massey Ferguson tractors through the utilization of a Brazilian government grant. The second phase of the MFP has commenced with the delivery of an additional eighty (80) tractors to the Government of Ghana through the Ministry of Food and Agriculture (MoFA). Mechanical Llo