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When the shareholders of Flour Mills of Nigeria Plc gather in Lagos on August 30 for their annual general meeting, the major beneficiary of the final dividend the Board will seek approval for will be Excelsior Shipping Company Limited.
According to Flour Mills Nigeria Plc ownership structure as shown in its financial statement released at the Nigerian Stock Exchange, out of its shares outstanding of 4,100,395,606 units, Excelsior Shipping Company Limited owns 2,242,727,580 units or 54.70percent.
In a dividend notice at the Nigerian Stock Exchange (NSE), Flour Mills of Nigeria Plc said it will be rewarding its shareholders with N1 final dividend per share.
The ultimate holding company is Excelsior Shipping Company Limited, a company registered in Liberia. The beneficial owner of Excelsior Shipping Company is a trust established by the late John S. Coumantaros.
Other individuals and institutional shareholders account for 1,857,668,026 units of Flour Mills of Nigeria Plc representing 45.30percent stake.
The implication of this shareholding structure on the proposed final dividend is that Excelsior Shipping Company Limited which is the majority shareholders will earn about N2.2billion as final dividend income from Flour Mills while other individuals and institutional shareholders will receive a total of N1.8billion. Flour Mills Nigeria Plc has a market capitalisation of N134.287billion at N32.75kobo per share.
Flour Mills of Nigeria Plc recently released its audited results for the financial year ended March 31, 2018 with group revenue increasing to an all-time high of N542.7billion, compared to N524 billion in 2017, representing 3.5percent year-on-year (y-o-y) growth.
The group operating profit at N48billion compared to N41 billion in 2017 represents 16.9percent year-on-year growth. Also, the group Profit Before Tax (PBT) at N16.4 billion compared to N10.4 billion in 2017, indicates 58percent year-on-year growth; while Profit After Tax (PAT) at N13.6 billion compared to N8.8 billion in 2017 indicates 54.1percent growth year-on-year.
The Company, Flour Mills of Nigeria Plc recorded revenue of N389billion, compared to N375billion in 2017, which is 4percent increase year-on-year. The Group’s basic earnings per share stood higher at 483kobo against 303kobo in 2017.
Flour Mills is the market leader in food and agro-allied products in Nigeria. 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 sales of fertilizer, manufacturing and marketing of laminated woven polypropylene sacks and flexible packaging materials, operation of terminals A and B at the Apapa Port, customs clearing, forwarding agents, shipping agents and logistics.
“Despite the modest growth in Agro-Allied, we note that performance within the sub-sector has been mixed – with revenue moderating successively in every quarter – amidst the tough operating landscape for edible oils, animal feeds and sugar businesses” said Ifedayo Olowoporoku team of research analysts at Lagos-based Vetiva Capital.
In a bid to deleverage its business, Flour Mill raised about N40 billion through a Rights Issue that was finalised earlier this year. Analysts we expect this to impact earnings in financial year 2019. “Notably, short term liabilities (including bank overdrafts) moderated 35percent year-on-year (y/y) in FY’18 as the company dedicated 75percent of its rights proceeds to repayments of these facilities”, Vetiva said.
The analysts who set a target price (TP) of N40.99 for the stock has asked investors to buy, saying that they are optimistic for even further improvement in Floumill’s debt mix, “given plans to refinance expensive short-term debt with N70 billion in medium term notes and also to sell off some of its real estate assets to further reduce financial leverage.” The company’s share price stood at N32.75 on Tuesday.
“Given the still opaque timelines and details for these plans however, we are yet to factor this into our model,” Vetiva added.
The Group said that food business has performed in line with its objectives on both top and bottom lines. Flour Mills said results of its agro-allied businesses reflect a combination of both profitable and growing businesses (feed, fertilizer), while “our latest entry into this category are yet to fully deliver according to our expectations including sugar, with our local backward integration program in Sunti, as well as our edible oil business.” BAGCO, its packaging material business, recorded very good results, maintaining its leadership position in its product categories.
“In terms of outlook, Bloomberg consensus wheat forecasts indicate that wheat prices which form the bulk of Flour Mills of Nigeria’s inputs are expected to rise by only circa 5percent between 2018 and first-quarter (Q1) 2019 (end-March). Although the company is exposed to a downside risk from a potential slide in the naira relative to other major currencies, we believe the likelihood of this is remote given the prevailing price levels of crude oil and improved crude oil production levels relative to 2016/2017 levels”, Tunde Abidoye-led team of research analysts at Lagos-based FBNQuest Limited said in their July 2 note to investors.
