Flour Mills of Nigeria Plc: Diversified product base bolsters profit
Paul Gbededo, group managing director, Flour Mills of Nigeria Plc
Flour Mills of Nigeria Plc, the market leader in food and agro allied product in Africa’s most populous and largest nation, has just reported its unaudited half year results with continued growth through most segment of the business.
The Nigerian consumer goods giant plans to sell shares via a rights issue to cut debt and is registering N70 billion bond programme to refinance short term loans.
Growth from product and non product mix underpins revenue
Revenue was N268.34 billion in the six months ended September 30th September 2017, an increase of 17 percent when compared to N255.53 billion recorded last year.
The food business value chain was responsible for an increase of N40 billion in Group’s turnover.
Earnings Before Earnings and Tax (EBIT) or operating profit spiked by 53.56 percent to N29.47 percent in the period under review from N19.19 billion of the same period of last year.
The growth in operating profit was underpinned by a N5.08 billion net operating gains as against a loss of N8.08 billion recorded the previous year.
Flour Mills recorded a 53.06 percent increase in profit before tax at N13.47 billion compared to N8.80 billion for the same period of 2016. Profit after tax followed the same growth trajectory as it increased by 44.29 percent to N9.33 billion in the period under review from N6.46 billion the previous year.
Earnings per share increased to N317 in the period under review as against N223 billion the previous year.
“Our half year result showed continued growth through segments of our business, especially in the food segment, delivering top and bottom lines financials in line with our objectives,” said Paul Gbededo, Group Managing Director of the company.
“The Group recorded growth from volume and product mix. This growth was despite what continued to be a challenging business environment. Overall the business showed an impressive performance in the first half of the year. We are positive that we are on track to meet our growth target for the remaining part of 2017/2018 financial year,” said Gbededo.
Flour Mills’ finance costs increased by 48.90 percent to N13.44 billion as at six months ended September 30th 2017 from N10.92 billion the same period of last year.
The Nigerian miller has an interest coverage ratio of 1.87 times earnings while total debt in the balance sheet fell by 23.54 percent to N147 billion. However, finance cost spiked by 48.85 percent to N16.26 billion.
The lower a company’s interest coverage ratio is, the more its debt expenses burden the company. When a company’s interest coverage ratio is 1.5 or lower, its ability to meet interest expenses may be questionable.
The Nigerian millers’ estimated weighted average cost of borrowing is 2.53 percent on the N147 billion total loans in the balance sheet.
“Flour Mills has started a N70 billion Medium Term programme to refinance debt and lower the cost of borrowing,” said Jacque Vauthier, Chief Financial Officer (CFO).
As part of strategic measure to consolidate operations, create value for shareholders and enhance administrative and operational efficiency, the company in Q2, announced the completion of a merger and absorption of Golden Penny Rice Limited, a wholly owned subsidiary into Flour Mills of Nigeria Plc.
The company said it is expected that the restructuring will meaningfully improve the synergy in the Group, reduce costs, and improve the competitiveness of the company’s product, with the aim of advancing the profitability of the Group.
Jacque Vauthier said the management of the company was confident that the food business value chain will record even stronger performance as the year progresses. “To this end, we are enhancing our marketing activities to push the brand presence into newer outlets .”
According to the Group Head, Corporate Business Development, Sadiq Usman, in the agro allied division, the Group’s focus will remain on improving competencies and developing execution capacity to backwardly integrate its core value chain; Sugar sweeteners, edible oils, feeds and proteins and cassava starches.
He further said “the Group will leverage its significant resources and continue to build the capacity of local farmers and farming groups, who are integral part our strategy to develop sustainable, locally focused supply chain.
Flour Mills Shares closed at N33.50 on Friday’s trading session on the NSE, up 5 percent. One Year Return, the shares are up 80.50 percent. It has a market capitalization of N87.91 billion. The company declared a dividend of N1.00 per share, which translate into a dividend yield of 3 percent.
Flour Mills of Nigeria Plc (FMN) was incorporated on 29th September, 1960 as a private limited liability company with a paid-up share capital of N1 million and converted to a public company in November, 1978.
The group is primarily engaged in flour milling; production of pasta, noodles, edible oil and refined sugar; production of livestock feeds; farming and other agro-allied activities; distribution and sale of fertilizer; manufacturing and marketing of laminated woven polypropylene sacks and flexible packaging materials. Flour Mills is also involved in ports operation of Terminals A and B at the Apapa Port, as well as shipping logistics.
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