We Are Exploring Acquisition Opportunities In Nigeria - Chuka Mordi

Summary

Chuka Modi, CEO of Ella Lakes plc, discusses the company's growth in revenue and assets over the past 9 months, with a focus on their upcoming palm oil mill operations and their venture into pig farming. He explains the strategic shift from selling fresh fruit bunches to milling palm oil, and the benefits of vertical integration. Modi also highlights the challenges and opportunities in Nigeria’s agricultural sector, including mechanized farming, food price inflation, and smallholder farmer support. While addressing climate change and AI’s role in agriculture, he remains optimistic about the future growth of the sector.

Takeaways

• 😀 Ella Lakes plc has achieved positive cash flow of 68 million Naira in the first quarter of the year, primarily from selling fresh fruit bunches. The company expects to significantly increase revenue once its palm oil mill becomes operational.
• 😀 The company has grown its asset base, particularly through the acquisition of land and the installation of a three-ton per hour crude palm oil (CPO) mill, which is expected to enhance revenue generation.
• 😀 Palm oil is seen as the starting point in a value chain that could lead to the production of palm kernel oil (PKO), soaps, and other derivatives. The company plans to further process palm oil into other products.
• 😀 Ella Lakes has entered the pig farming business, using palm kernel cake as a key feed ingredient. This is part of the company’s broader diversification strategy.
• 😀 There are rumors of a potential acquisition, but the CEO clarifies that the company is focused on organic growth and only pursuing M&A opportunities that align with its growth strategy.
• 😀 To combat food price inflation, the CEO suggests that improvements in agricultural productivity, better infrastructure, and higher-quality inputs are essential.
• 😀 Mechanized farming is key to scaling agricultural production in Nigeria, but the cost of machinery and maintenance, as well as access to finance, remain challenges.
• 😀 The CEO emphasizes that while AI can play a role in agriculture, focusing on fundamental improvements such as productivity and cost efficiency should remain a priority.
• 😀 Ella Lakes plans to expand its footprint by developing its land bank in states like Ekiti and Ondo, and will focus on organic growth in its upcoming equity raise.
• 😀 Despite challenges, the CEO is optimistic about the second half of the year, particularly with cash flow now achieved and expected growth in the agricultural sector if macroeconomic stability is maintained.

Q & A

What is the recent financial performance of Ella Lakes plc?

Ella Lakes plc reported a growth in both revenue and assets for the 9-month period ending in April 2025, with a notable improvement in cash flow amounting to 68 million naira in the first quarter. The company achieved this by selling fresh fruit bunches, with plans to start milling them into palm oil soon.

How has Ella Lakes been expanding its assets?

Ella Lakes has significantly grown its assets by acquiring land for expansion and installing a three-ton per hour crude palm oil mill. This mill is expected to be fully operational soon, which will allow the company to shift from selling fresh fruit bunches to milling them into palm oil, thereby increasing revenue.

Why did Ella Lakes choose to invest in palm oil production?

Palm oil was chosen as a key area of investment because it is the first step in the value chain, before moving into palm kernel oil and other products like soaps. The company plans to further develop its palm oil operations by processing the oil and expanding into palm kernel oil production.

What other diversifications is Ella Lakes pursuing besides palm oil?

Ella Lakes has diversified into pig farming, starting with 400 pigs. The company plans to integrate palm kernel cake, a by-product of palm oil milling, into its pig feed, thus utilizing its own agricultural output for a more vertically integrated business model.

Is Ella Lakes considering any mergers or acquisitions (M&A)?

Ella Lakes is open to growing through both organic growth and mergers & acquisitions (M&A). The company has looked at potential targets over the past year, but any acquisition must align with their growth strategy. They plan to make announcements if any acquisition opportunities are pursued.

What is Ella Lakes’ perspective on the agricultural landscape and food prices?

Ella Lakes believes that there is no single solution to reducing food prices. Instead, a combination of factors such as increasing productivity, improving infrastructure, and providing better inputs to farmers can help reduce food inflation.

How does mechanized farming play a role at Ella Lakes?

Mechanized farming is crucial for the scale of operations at Ella Lakes. The company uses modern farming technology to improve efficiency. However, they acknowledge that scaling mechanized farming across the country requires stable exchange rates, lower inflation, and improved access to capital.

How can Nigeria scale mechanized farming nationwide?

Scaling mechanized farming in Nigeria requires macroeconomic stability, including price stability, access to financing at lower rates, and an increase in productivity. These factors would help make farming more efficient and sustainable at a larger scale.

What steps are being taken to support smallholder farmers in Nigeria?

Smallholder farmers are vital to Nigeria’s food security, and supporting them with quality inputs, fertilizers, and education can significantly boost agricultural productivity. Aggregating the produce from smallholder farmers will also help create larger markets.

What is Ella Lakes’ approach to managing costs in its operations?

Ella Lakes manages its costs by introducing efficiencies in operations and aiming for economies of scale. They plan to produce their own palm kernel cake to reduce feed costs for their pig farming operation and minimize reliance on external suppliers.