The outbreak of the Ebola virus in West Africa has prompted market briefings from a number of small UK-listed companies with operations in the affected areas of Guinea, Liberia and Sierra Leone.
Aureus Mining, Sierra Rutile and Stellar Diamonds are among a handful of miners who have so far seen no reported or suspected cases at their sites but are taking precautionary measures.
Less encouragingly, Golden Saint Resources has this morning announced it has ceased operations at one location for the time being due to the Ebola situation having “taken a turn for the worse” in the area, while yesterday little surveillance technologies firm Digital Barriers (market cap £50m) said it will see “a clear impact” on revenues as a result of the virus outbreak.
However, recent news that the disease has arrived in Nigeria — Africa’s most populous country and biggest oil producer — brings into the frame a number of companies with which the average investor will be far more familiar, including oil giant Royal Dutch Shell (LSE: RDSB) and personal goods group PZ Cussons (LSE: PZC).
Royal Dutch Shell
Nigeria has been problematic for Shell for some time: sabotage and crude oil theft saw a 27% decline in Shell’s Nigerian production in 2013, with a 3% negative impact on group volumes.
Ebola has the potential to hit even harder, if John Campbell, a former US ambassador to Nigeria, recently quoted in the Houston Chronicle, is right:
“Should there be a significant outbreak … the consequences for the West African oil and gas industry would be massive … One would anticipate that the big oil and gas companies would evacuate their expatriate personnel and production would throttle way back”.
However, as things stand, Nigeria has confirmed just 10 cases with another 177 persons who have had primary or secondary contact under observation.
The government has declared the outbreak a national emergency and approved over £6.5m to help contain it. International efforts are also being mobilised, and it is to be hoped Nigeria can avoid a full-scale epidemic.
However, even if Shell lost its entire production in the country, we’d be looking at around 10% of group volumes — something more than a flesh wound but less than a mortal blow.
With Shell trading on a modest P/E of 11 and yielding 4.5%, I think I’d be sitting tight if I were a shareholder.
PZ Cussons
Founded in 1879 as a trading post in Sierra Leone, PZ Cussons has grown into an international company. However, Africa remains the biggest region for revenues (42%); and, within Africa, Nigeria is the major contributor. So, PZ Cussons is rather more exposed than Shell.
On the other hand, provided Ebola is reasonably contained PZ Cussons could well see sales rising in a number of its personal and household cleaning products. Anti-bacterial handwash Carex, in particular, is currently being promoted on the product’s Nigerian Facebook page as follows:
Have you washed you hands today?
Learn how – https://www.wikihow.com/Wash-Your-Hands
Share This. #Ebola #Handwashing #CarexCares
The valuation of PZ Cussons — P/E 20; yield 2.2% — is markedly richer than that of Shell. But again, if I were a shareholder, I think I would be sitting tight — unless the situation showed signs of drastic deterioration.
Finally, it’s worth noting that Shell and PZ Cussons have faced many crises in the past and managed to keep paying dividends. Indeed, just last month PZ Cussons announced its 41st consecutive annual dividend increase.