|
Getting your Trinity Audio player ready...
|
Flour Mills of Nigeria Plc posted nine months ended December 2017 earnings that exceeded analysts’ estimates as net operating gains contributed to wider profit margins.
For the nine months ended December 2017, Flour Mills’ net income surged by 78.91 percent to N13.27 billion as against N7.40 billion the previous year.The results beat N11.21 billion average estimates of 11 analysts surveyed by BusinessDay.
Sales increased by 9.63 percent to N427.50 billion as food business contributed N44.75 billion to Group’s revenue.
A net N5.50 billion operating gain help underpin the Nigerian consumer giant’s margins, thanks to lower foreign exchange rates.
Earnings Before Interest (EBIT) margin, a measure of efficiency, increased to 10.33 percent to 7.15 percent as at nine month ended December 2017 from 6.90 percent the previous year.
Net profit margin, another measure of efficiency, increased to 3.10 percent in the period under review as against 1.81 percent the previous year.
The company said it shall continue to drive efficiency and grow its footprints in the Agro-allied segments.
“We are delighted to report another quarter of solid performance, despite harsh operational environments, which have been compounded further by traffic congestions in Apapa,” said Paul Gbededo, Group managing director of the company.
“Our food business has continued to show impressive results, in line with our strategy to lead the market in all major categories,” said Gbededo.
The management of Flour Mills has utilised the resources of its owners in generating higher profit as return on equity (ROE) increased to 11.87 percent in the period under review from 7.27 percent the previous year.
The Nigerian miller got the approval of the Securities and Exchange Commission (SEC) to proceed with a rights issue of N39.9 billion as proceeds of the capital raising will be used to reduce debt and strengthen its working capital position.
The amount of debt in the capital structure of Flour Mills has reduced as debt to equity ratio fell to 148.15 percent in the period under review from 172.19 percent the previous year.
Times interest coverage ratio stood at 1.75 times operating profit. In other words, the company has the money to pay interest expense.
A bearish global price outlook for wheat in 2018 by analysts could bolster gross margins of Flour Mills as the firm relies on the use of the raw material to meet production.
“Going into the 2017/2018 season, USDA estimates a relatively unchanged global wheat production picture (-0.3 percent Year on Year to 752MT) as expectation of tight supply in US, Australia and Canada (-32.2MT to 95.9MT) is expected to offset high-yield induced output growth in the Euro area, India, and Russia (+27.9MT to 332.9MT),” said analyst at ARM Securities Limited.
According to data gathered by Bloomberg, price of wheat declined by 9.2 percent to $154.86 per bushel in 2017 from $535.2 in 2016 as production of the commodity was supported by output expansion in Russia, Australia, and US with a combined increase of 29.4 MT to bring their cumulative output to 168.9MT.
Flour Mills’ share price has gained 10.15 percent to close at N33.95 as of Wednesday, valuing it at N89.09 billion.
BALA AUGIE
