Flour Mills of Nigeria Plc, the country’s biggest miller by market value, saw after tax earnings rise by 54.1 percent to N13.6 billion in the 2017/2018 full-year financial period, but revenues, despite slightly rising from the previous year, was below analysts’ expectations.
Revenue climbed 3.5 percent on an annual basis to N542.7 billion during the period, 5.6 percent less than the consensus estimate of N574.9 billion.
The lower than expected FY’17/18 top line was majorly affected by Q4’17/18 revenues which slowed by 14.4 percent annually and 10.8 percent on a quarterly basis to N115.2 billion, the lowest in eight quarters.
“We are concerned about the seemingly slow top line growth recorded by the firm which was largely impacted by the weakness in Q4’17/18,” said Jerry Nnebue, a consumer goods analyst at Lagos-based investment bank, Cardinal Stone Partners.
“While this has traditionally been a weak quarter, Q4 revenues was much lower than we expected given slight improvement in consumption and easing of constraints at the Apapa area, compared to the situation in Q3,” Nnebue said in a note to clients, Monday.
Overall, the company’s food segment remains the largest contributor to revenue (80%), but grew slowly by 2.2% YoY. In contrast, the agro allied segment grew noticeably by 12.7% YoY.
Flour Mills’ share price was up 2.34 percent to N32.75 Monday, according to data obtained from the Bloomberg terminal, outperforming an industry average of -0.31 percent.
“There are a number of positives to take home. Although finance costs inched higher, the outlook seems promising following the application of the rights issue concluded during the year,” said Nnebue, who’s firm retains a BUY outlook from their last review which has a target price of N46.64.
After tax earnings rose 54.1 percent to N13.6 billion from N8.8 billion the year before.
Save for the 2015/2016 financial period when net profit hit a record N14.42 billion, the milling company’s net profit in the 2017/2018 is the highest since 2013.
Also, the company proposed a final dividend of N1.00 per share, which represents a dividend yield of 3.1 percent based on its last close price of N32.00.
Other highlights
FY’17/18 gross margin was relatively flat YoY at 12.7% with raw materials the largest contributor to production costs at over 88 percent. On a quarterly basis, Q4’17/18 gross margin was higher at 11.1% compared to 9.8% in Q4’16/17. Operating margin however dipped significantly during the quarter to 3.7% (Q4’16/17 – 10.5%) impacted by much higher selling and general expenses (7.7% of sales) compared to Q4’16/17 (6.9% of sales).
Net finance charges declined by 48.6% in Q4’17/18 to N7.2 billion (Q4’16/17 – N14.0 billion). However, on a full year basis, this increased slightly by 3.0% to N31.9 billion (FY’16/17 – N31.0 billion). During the year, the company recorded a 22.7% increase in interest expenses on its loans and overdraft to N35.7 billion, while interest income declined by 47.8% to N816.3 million. On a net basis however, the impact of this was muted by the N3.0 billion fair value gain on derivatives.
The company reported a loss before tax of about N3.0 billion in Q4’17/18 (compared to a profit before tax of N200 million in Q4’16/17). However, a tax credit of N3.3 billion (N1.3 billion in Q4’16/17) saw the company post an after tax profit of N370 million (Q4’16/17 – N1.4 billion). Notwithstanding, full year bottom line rose by 54.1% YoY to N13.6 billion.
Flour Mills of Nigeria PLC provides food and agricultural products and services. The Company offers flour, noodles, pastas, oil, spreads, and sugar, as well as feeds, fertilizers, and logistics and support services.
Flour Mills of Nigeria serves customers in Nigeria.
