1. Michael Warner to introduce himself and Chairman
Measuring local content in manufacturing:
A case study of paint manufacture in Nigeria
Dr. Michael Warner – Local Content Solutions
Eng. S.I.C. Okoli – Protective Coatings Manufacturers Nigeria (PCMN)
Michael Warner to introduce himself and Chairman

2. Part 1 :A case study of paint manufacture in Nigeria
Eng. S.I.C. Okoli – Protective Coatings Manufacturers Nigeria (PCMN)
Part 2 : Measuring local content in manufacturing
Dr. Michael Warner – Local Content Solutions
Michael to identify the two parts to the presentation
Measuring local content in manufacturing:
A case study of paint manufacture in Nigeria

3. Overview
Part 1 – Case History of establishing paint manufacturing in Nigeria
Paint manufacturing development in Nigeria
Local content requirements for paint manufacture
Using license technology
Capacity development in relation to market
Multiplier effects of supporting manufacturing
Part 2 – Selecting Nigerian content metrics for the paint industry
What metrics to measure Nigerian content?
General
Specific to paint manufacture
Conclusion
Michael to outline the key points of the presentation then hand over to Chairman
Measuring local content in manufacturing:
A case study of paint manufacture in Nigeria

4. Manufacturing license signed Fully imported product
Overview of PCMN development
100% local manufacture
100% Nigerian ownership
Manufacturing license signed
PCMN becomes Plc
60% Nigerian ownership
Semi finishing
40% Nigerian ownership
Chairman to describe PCMN’s development highlighting Increase in Nigerian ownership and capacity expansion
Thank you for your introduction Mr Warner,
Honoured Guest, Ladies & Gentlemen – it is my pleasure to present to you, the road to development of a Local Content Experience in Nigeria’s Manufacturing Industry, by PCMN Plc a truly Nigerian company.
This slide describes the transition of PCMN from its commencement through to the present day and into the future
Starting as a coatings distributor in 2001 PCMN has evolved into Nigeria’s leading coatings manufacturer for the Oil & Gas Industry with emphasis on Nigerian content in everything it does. .
PCMN is ready to take up the challenge of the future in meeting the needs of Nigeria’s Oil & Gas and infrastructure Industries – A proudly Nigerian company producing WORLD CLASS products
Distribution license
Fully imported product
100% foreign ownership
2000
2002
2004
2006
2008
2010
2012
2014
Measuring local content in manufacturing:
A case study of paint manufacture in Nigeria

5. Overview of PCMN personnel development
Number of staff
This slide shows the impact that manufacturing has had on the employment levels within PCMN
From this slide you will see the proof that Government decision to develop Local Content Capacity is a true provider of jobs in Nigeria
PCMN employment levels have grown significantly and continue to increase as the business grows, adding sustainable value to Nigeria’s economy
Please note that Expat levels have remained static
Measuring local content in manufacturing:
A case study of paint manufacture in Nigeria

6. Capital expansion Phase II increases capacity
Overview of PCMN capacity development
New factory proposed 2015
Import / production levels
(litres per annum)
PCMN after obtaining the license to Manufacture from International Paint, rapidly set up our manufacturing unit.
We had to run down stocks of imported product and ramp up locally manufactured product as the stocks were depleted
The graph shows the trend of run down of stock imported and build up of locally manufactured products
The culmination of our efforts will be a new factory completed in in 2015
Capital expansion Phase II increases capacity
Measuring local content in manufacturing:
A case study of paint manufacture in Nigeria

7. Importance of paint manufacturing
Global cost of corrosion > $2 Trillion per annum
Likely cost to Nigerian economy = towards $10 billion dollars per annum*
Nigerian investment to increase dramatically in next years
Offshore oil and gas / onshore processing / transmission pipelines
Passing of PIB into law will release projects resulting in increased demand
PCMN positioning its capacity plans to capture a large % of market
Upstream / downstream and M&R activities
This slide shows the cost of Corrosion to the world economy – over $ 2 Trillion annually – an incredible cost!
The scourge of corrosion in Nigeria’s oil and gas and Marine industry alone costs the Nigerian economy many Billions of US $’s annually
To fight back against corrosion it is essential that the worlds best products are used, and PCMN are proud to partner with International Paints to manufacture these products in Nigeria, helping to combat corrosion and save our clients many hundreds of millions of US $ in replacing assets that end up rotting away if not properly protected
Measuring local content in manufacturing:
A case study of paint manufacture in Nigeria

8. Nigerian heavy duty protective coatings market estimate
Local content levels in paint manufacturing
Nigerian heavy duty protective coatings market estimate
PCMN Projected capacity
Million litres per annum
In this slide, we demonstrate the current estimated volumes of coatings used in Nigeria annually.
PCMN has installed capacity to handle these needs, though we also manufacture decorative, industrial and specialised coating systems for Nigeria to the same world class standards as for the oil & gas Industry.
To sustain this investment we need to generate additional markets and are in discussions with our licensor about exporting to neighbouring ECOWAS and other West African destinations where volumes cannot allow for local manufacture, in a further effort to develop our business and keep manufacturing “In Africa” where it belongs.
Measuring local content in manufacturing:
A case study of paint manufacture in Nigeria

9. License History
License manufacturing agreement entered into 15th May 2009
Covers manufacturing and use of registered trademarks
International Paint is a major supplier of protective coatings globally
Part of the AkzoNobel group with turnover > $ 18 billion
Extensive oil and gas experience globally
License agreement catered for
Establishing manufacturing plant in Lagos
Transfer of initial product range and associated technical support
Guidance on factory start-up and regular auditing
PCMN now accredited to ISO 9001: 2008
As a result of the excellent business relationship between International Paints and PCMN IP agreed to allow PCMN a manufacturing License – a first in 20 years for International Paints
PCMN are proud to have lived up to the faith placed in it by International Paints, and stride confidently into the future – manufacturing world class products to world class quality levels - (PCMN has been accredited to ISO 9000:200 – Made in Nigeria and made possible by governments local content law passed in 2010
Measuring local content in manufacturing:
A case study of paint manufacture in Nigeria

10. Advantages of license technology
Licensee
Access to world class products
Reduced product development costs
Quick establishment of product range
Support from technology provider
Licensor
Access to market
Zero capital investment required
Reduced logistics
No in country footprint required
As a result of the License awarded by International Paints, PCMN has been able to attain the following benefits:
Access to world class technology
On going technical cooperation
Incremental employment opportunities for Nigerian nationals
Cascade benefits to local raw material and packaging suppliers
Overall addition to the Nigerian fiscus as a result of the increased employment and profit retention in Nigeria
Economy
Increased employment opportunities
Support for infrastructure projects whilst benefitting economy
Access to current technology
Encourages capital investment
Measuring local content in manufacturing:
A case study of paint manufacture in Nigeria

11. Capacity Development - Challenges
Difficulty in forward forecasting
Associated Impact of stock on working capital
Capacity building needs to be proactive
Role of operators
Forecasting assistance
Identifying associated bolt-on opportunities
Forecasting of product requirements is difficult as we do not have access to decision makers on project plans going forward
This results in the retention of higher levels of raw materials and packaging than is necessary – absorbing working capital
Capacity building needs to be invested in ahead of market requirements and PCMN has done this to be proactive
We believe that Operators also have a clear role to play in identifying required capacity and partnering with manufacturers to ensure clarity on needs
To provide more critical mass - additional bolt on opportunities such as drilling chemical manufacturing etc can be developed to increase the local content of items used in the oil & gas industry in Nigeria with operators input and assistance
PCMN /manufacturing needs assistance from NNPC and the global operators to further develop our business goals.
We have invested large scale capital to build capacity ready to meet the needs of the Nigerian marketplace as growth occurs
Measuring local content in manufacturing:
A case study of paint manufacture in Nigeria

12. Capacity development (continued)
Some descriptions of the available capacity now as per what it was only a year ago
Photos left to right
2001 Distribution commences in Nigeria - all stocks fully imported
2005 Tinting (Semi finishing) – increased job opportunities created as a result
2010 Small scale manufacture – Training and development phase for National employees
2012 Expanded capacity manufacturing – rapidly increasing employment opportunities
PCMN has significantly grown capacity and manufactures all products strictly in accordance with ISO 9001:2008 and liscensors (International Paints) global standards
We have also ensured maximisation of Nigerian content in our supply chain as far as is practical through purchasing our increased capacity capital assets from local manufacturers and are very proud of this fact.
We are ready to meet the challenges of the future in world class production and quality levels!
2000
2002
2004
2006
2008
2010
2012
2014
Measuring local content in manufacturing:
A case study of paint manufacture in Nigeria

13. Capacity development (examples)
Addition of 2 off 2400 litres high speed dispersers (previous slide)
Addition of 6 off 2000 litre “pans” for mixing
Further capacity expansion planned for (5,000 litre pans)
Installation of semi automatic piston type filling line
Associated infrastructure (generators etc)
PCMN has invested heavily in fixed assets to ensure suitable capacity is available in the market
Continual training is essential to ensure world class quality levels
We have also invested heavily into working capital to keep 6 months of stocks in country at all times, to ensure that the Nigerian marketplace has continual supplies of protective coatings
The next phase is to further double capacity and also build a 21st century state of the art factory at our premises outside of Lagos in Mowe purchased in 2010
Measuring local content in manufacturing:
A case study of paint manufacture in Nigeria

14. Overview of PCMN personnel development
Number of staff
This slide reinforces the dramatic increase in Nigerian Nationals employed by PCMN directly as a result of local manufacture now being undertaken in Nigeria
The continued incremental employment of Nigerian Nationals can be sustained throughout the cooperation and further development of PCMN scope of supply to the Oil & Gas Industry of Nigeria
The more the Operators encourage us, the more we add to job creation in Nigeria
Measuring local content in manufacturing:
A case study of paint manufacture in Nigeria

15. Manufacturing multiplier
The Local content Law gives clear economic benefit to Nigeria
Manufacturing offers significant benefit to national (Macro) AND local (Micro) economy
Increased personnel required to operate manufacturing versus distribution
Nigerian ownership is critical to the further development of the economy and the multiplier effect coming into place – for every 1 job directly created 10 additional downstream jobs are created
PCMN is proud to be at the forefront of Nigerian content development in paint and coatings manufacture
We look forward to partnering with NNPC and the oil majors to grow the Nigerian Economy into the powerhouse it should be in Africa.
The shareholders of PCMN have placed their faith in the Local Content Law, and also their money, to grow PCMN to the business it is today.
With the assistance and guidance of NNPC and the major operators, PCMN and similar companies can benefit from the local content law and add significant value to the Nigerian economy and the “snowball effect” can be dramatic and influential to the future of Nigeria.
We are proud to be the first “Global “ Paint Producer to take the step into the 21st Century and to benefit Nigeria in its local content drive
Measuring local content in manufacturing:
A case study of paint manufacture in Nigeria

16. In summary Capacity is available
Proven in-country capacity should be supported
Economic means
Enforcement
Expanding markets to utilise Nigerian manufacture
Regionally
Multinational projects
Expanding portfolio
Linking proven manufacturers to customers
Expanding visibility
Infrastructure project requirements
Earlier involvement
Government and Oil & Gas Operators need to support and assist those Nigerians who have embraced the Local Content Law.
Economic protection measures means increasing duty payable on the importation of finished paint products by “traders” and applicators that destroys the job creation within Nigeria
Enforcement of protection measure which requires ministerial sign off on imports should be attained as per the act and there is no reason for importation when all can be manufactured in Nigeria
We look forward to the continued development of Manufacturing Capacity in Nigeria to the benefit of all Nigerians. A true example of Local Content in action.
Thank you Ladies and Gentlemen
Measuring local content in manufacturing:
A case study of paint manufacture in Nigeria

17. Part 1 :A case study of paint manufacture in Nigeria
Eng. S.I.C. Okoli – Protective Coatings Manufacturers Nigeria (PCMN)
Part 2 : Measuring local content in manufacturing
Dr. Michael Warner – Local Content Solutions
Chairman to hand over to Michael for the metrics part of the presentation.
Measuring local content in manufacturing:
A case study of paint manufacture in Nigeria

18. Background to metric selection
Increasing clarity on metrics and reporting for operators
Lack of visibility on requirements – downstream supply chain
Metrics should
Provide details on Nigerian content
Measure of ability to serve the market
Goods or services
Currently limited to single point activities i.e. supplier assessments
Metrics may need to be adjusted to reflect the organisations business
Supply chain needs to be proactive
Work in progress
Measuring local content in manufacturing:
Selecting Nigerian content metrics for the paint industry

19. Investment / ownership Manufacturing and services
Key areas of measurement
Measures identified to
Indicate Nigerian content
Identify the suitability of the business to serve the market
Currently being finalised prior to initiating monitoring
Investment / ownership
Training
Employment
Importation
Manufacturing and services
Measuring local content in manufacturing:
Selecting Nigerian content metrics for the paint industry

20. Accuracy of measures
Care should be taken when selecting national content measures
Metrics may be divided into 3 main types
Erroneous – [Insert definition]
Proxy – [Insert definition]
Accurate – [Insert definition]
Some erroneous metrics may provide useful background information into supply chain
Should be clearly identified
How to measure relationship between licensee and licensor?
Measuring local content in manufacturing:
Selecting Nigerian content metrics for the paint industry

21. Sample measures – manufacturing and services
Metric
Accuracy
Volume manufactured in Nigeria per annum since start-up as a % of total volume sales
Proxy
Manufacturing capacity of Lagos operation per annum since start-up
Erroneous
Number of product SKU's manufactured in Nigeria by year as a % of total sold
Cumulative number of formulations transferred from technology provider
$ value of raw material purchases awarded to nationally registered vendors (Inc. packaging) per year as a percentage of overall $ value
Accurate
Local content based upon $ value of raw material purchase less proportion of imported components of purchased goods e.g. CIF value
Measuring local content in manufacturing:
Selecting Nigerian content metrics for the paint industry

22. Sample measures – manufacturing and services
Metric
Accuracy
Local content based upon $ value of raw material purchase less proportion of imported components of purchased goods e.g. CIF value, Top 10 products
Accurate
Number of man hours of national labour spent on manufacturing
Erroneous
$ value of service contracts awarded to nationally registered vendors per year as a percentage of overall sub-contracts
% nationally registered vendors on company vendor register
Proxy
Measuring local content in manufacturing:
Selecting Nigerian content metrics for the paint industry

23. Local content in manufactured paint
Assessing using drill down method for national content in each paint material
Can be used for domestically manufactured OR imported
Can be utilised with local content calculator
Limited visibility as it contains proprietary formulations belonging to licensor
Michael – Please can you insert this description I was thinking of the drill down slide from the training?
Measuring local content in manufacturing:
Selecting Nigerian content metrics for the paint industry

24. Conclusion
Paint industry is an important part of supporting infrastructure development
License technology with globally recognised technology provider offers significant benefits
Offers potential for rapid start-up and capacity development
More work needs to be done on visibility of metrics for supply chain
Further guidance on national content metrics
Government
Operators
Choice of metrics is important for correctly identifying national content
THANK YOU
Measuring local content in manufacturing:
Selecting Nigerian content metrics for the paint industry