SOMOCER was floated in December 2003 at a price of TND 16.5. It last paid a dividend of TND 0.075 in 2017, and its shares were last traded at TND 0.690 on November 8, 2023. At that time, SOMOCER’s return on equity was negative 11.06% and its annual stock market performance was also negative 13.92%, according to stock market broker Mac Sa. SOMOCER’s market capitalization, which was TND 58.95 million in 2016, is now just TND 28 million, according to Mac Sa.
CEO blames Indian competition and parallel market
Headed by Riadh Jaidane for a gross annual salary of TND 650,541, the Abdennadher Company, with a free float of 66.13% on the stock market, has only made a loss in two financial years in the last twenty years, during which its performance has been rather erratic.
With a loss of TND 5,913,526, its net profit for 2022 was its largest deficit, after a profit of TND 1.427 million in 2021.
SOMOCER also ended the 2022 financial year with a negative cash position of more than TND 16.8 million, despite an increase in revenue by almost TND 6.5 million, stable financial expenses of around TND 12 million and the benefit of the tax amnesty, which brought it more than TND 344,000.
Jaidane explained that these erratic results were due to the major difficulties experienced by COVID-19, during which the factories were closed for 45 days, costing the company more than TND 7 million. It is also due to the effects of the war in Ukraine, from where the company imports clay, which has pushed up the price of this raw material, which is now imported from Spain, thereby reducing SOMOCER’s margins and profits. All these factors mean that the company has not been able to lower its prices “because of Indian competition on the Tunisian ceramics market, which is also drowned out by the parallel market”, laments DG Jaidane.
Here comes the taxman
It should also be remembered that SOMOCER has been less than faithful to its forecasts. In its rosy outlook for investors and traders, the Abdennadher Company promised, for example, a turnover of more than TND 70 million in 2008. It only achieved TND 48.4 million. It promised more than TND 10 million in projected profits. It only achieved TND 4.4 million.
To add insult to injury, the company’s auditors also reported in their notes to the 2022 balance sheet that “the company was subject to a one-off tax audit concerning withholding tax, vocational training tax and social solidarity contribution for the period from January 1, 2020 to December 31, 2020. As the procedures relating to this audit are still underway and based on the information available to date, the final impact cannot be accurately estimated at the date of this report”.
A lagging share price and a single dividend in millions in 7 years
But that’s not the problem. It’s the stock market. One of the company’s investors wrote to us: “I would like to ask you to raise the issue of listed companies that have called on the savings of small shareholders and whose share value is today below the nominal value, such as SOMOCER. Nominal value: TND 1 IPO: TND 3.5 Current price: TND 0.6. This is the path taken by companies that have withdrawn from the stock market to the delight of their founding shareholders and managers. To give you a concrete example, of the 100,000 shares I bought in 2005 for TND 350,000, I will only get TND 60,000 back if I sell today.
However, after checking with a local stockbroker, we find that there is a great deal of truth in this complaint by that stockbroker, a copy of which we have received. Between July 2008 and October 2023, SOMOCER’s paper lost 60% of its value on the stock market. In 2023 alone, it lost 14%, after a loss of -7% in 2022, going from one fall to the next.
Jaidane first recalled that SOMOCER had twice reduced the nominal value, fromTND 16. 5 to TND 10 and then to just TND 1, wondering first of all whether there really was a stock market in Tunisia. He recalled that the company had once tried to increase the value of SOMOCER’s paper on the stock market by buying 1 million of its own shares. He concluded by saying that “the choice we have made today is to use the little cash we have to buy raw materials to be able to sell and export them, rather than to distribute them on a speculative stock market, knowing that we have a future program for group companies to intervene to support SOMOCER’s shares.”
In conclusion, for SOMOCER’s management, investors on the stock market and the problems with the share price are not a priority for the time being. Can the Financial Market Council (French: CMF) do anything about this? Isn’t it the defender of shareholders’ interests? Perhaps force SOMOCER to take urgent action to support its shares on the stock market?