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Sun International to Leave Nigeria As Economy Sinks Deeper

Sun International Limited has planned to exit Nigeria after the South African hotel operator’s earnings in the country plunged against the background of weakening economy and a dispute with the company’s local partners.

Sun International bought 49 % of the Nigerian Stock Exchange-listed tourist Company of Nigeria decade ago, giving it part-ownership of the Federal Palace hotel, Victoria Island, Lagos, one among the main hotels used by businessmen and tourists travelling to the business capital. Earnings before interest, taxes, amortization and depreciation at the Nigerian operations fell 58 % in the 12 months through June, Sun said in a statement issued on Monday. Occupancy rates at the property fell to 42 %.

“The Federal Palace continues to work in a difficult atmosphere with the Nigerian economy facing series of economic crises together with the low oil price,” the Johannesburg-based company added in the statement. The islamist uprising led by the Boko Haram terrorists and a weakening naira also hurt trading, whereas an “ongoing shareholder dispute has frustrated all efforts to develop and improve the property,” the company added.

Other South African companies to have left Nigeria include retailers Truworths International Limited and Woolworths Holdings Limited. Citing hard regulation and rising prices. Johannesburg-based MTN group Limited. Africa’s largest mobile-phone provider, in agreement to pay a N330 billion ($5.2 billion) regulatory fine in the country earlier this year, resulting in its first-ever half-year loss.

Sun has been drawn into a “long-standing family dispute” between fellow shareholders in Nigeria, the company said earlier this year, after employees, as well as South African expatriates, were detained without charges by Nigeria’s Economic and financial Crimes Commission. The staffs have still not had their passports returned to them, whereas no charges are laid against them or the company, Sun said on Monday.

The process of exiting Nigeria is probably going to be “protracted,” as Sun seeks to make sure it receives fair price for the investment, the company said. The shares were 0.6 % lower at 91.59 rand as of 11:46 a.m. in Johannesburg, valuing the company at 10 billion rand ($734 million).

Sun, owner of the Sun City resort northwest of Johannesburg, said full-year impaired adjusted earnings per share excluding one-time items fell 20 % to 6.28 rand, while sales gained 15 % to 12.2 billion rand. The final dividend was cut to 1.35 rand a share from 1.75 rand the previous year.

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