Flour Mills Nigeria Plc was incorporated in September 1960 as a private liability company, and commenced operations in 1962 with an installed capacity of 600 metric tons per day. The company was converted to a public limited liability company in 1978, and its shares were subsequently listed on the Nigeria Stock Exchange (NSE).
In its 52 years history, Flour Mills has remained at the forefront of wheat milling in Nigeria. The company’s flagship brand, Golden penny, remains one of the best known and the preferred brands among bakers, confectionaries and consumers in Nigeria. Flour Mills has invested over N25 billion in the milling infrastructure over the last seven years, to, maintain its competitive advantage.
Today, Flour Mills has a rated million capacity of 8000 metrics tons per day, making it one of the largest singlew site mills in the world.
The company’s flagship mill located in Apapa, Lagos comprises of 10 intergated mills. Each mill was designed as a multilevel operation in order to optimise the use in the sifting process, thereby reducing the energy requirement. In addition, the company maintainds dedicated mills to the processing of different wheat varieties to produce different flour types. This has ensured consistent quality of its product for 50 years. The Apapa Mill also boasts silos with a storage capacity to 191,000 metric tons.
As part of its diversification strategy, Flour Mills also engages in the importation and distribution of bulk cement.
The company just released its first nine months through December 2015 financial statement on the floor of the NSE, which showed the Nigeria miller surmounting the economic doldrums crimping the growth of most firms.
Gain on disposal on investment in associate bolster bottom line
For the first nine months through December 2015, Flour Mills’ net income surged by 477.50 percent to N19 billion from N3.29 billion the previous year. Sales increased by 7.90 percent to N263.68 million despite weak consumer discretionary spending.
Profit before tax also followed the same growth trajectory as it spiked by 434.04 percent to N19.78 billion in 2015 compared with N3.69 percent in 2014.
The growth at the top lines was a result of an exceptional item of N23.73 billion as the company’s reaps the dividend of a stake sale of Lafarge Plc last year.
Lafarge Africa in November agreed to purchase Flour Mills’ 30 percent holding in United Cement Co. of Nigeria.
Stock market reacted positively to the company’s giant stride as its share increased by jumped to N19.88 by 1:02 p.m, Nigeria’s commercial capital, and the biggest advance since Dec.3, 2014.
Analysts say the performance of the largest miller amid economic doldrums shows its management and boards of directors are bent on maximizing the value of shareholders.
Africa’s biggest economy is facing a squeeze in consumption as the nation of more than 170 million people suffers from a slump in crude oil prices by more than 70 percent to $29 per barrel.
Nigeria’s economic growth of 2.84 percent in the third quarter of 2015, a decline from 6.23 percent a year earlier as a result of lower oil prices, according to Nigerian Bureau of Statistics (NBS).
Nigeria’s consumer price inflation stood at 9.6 percent year-on-year in December, up 0.2 percentage points from November, and still above the central bank’s target upper limit of nine percent, according to the statistics body.
In order to curb inflation and protect the economy from continued drop in oil price, the central bank by imposed trading restrictions and banning importers from using the foreign-exchange market for about 40 items.
The edicts have made it difficult for Flour Mills and its peers to import raw materials and obtain dollars needed to operate in a tough and unpredictable environment.
Strong margins, high returns amid weak economy.
Flour Mills was efficient amid weak economy as net margin, a measure of profitability and efficiency increased to 7.25 percent in 2015 as against 1.30 percent in 2014. Pre-tax margin moved to 7.02 percent in 2015 compared with 1.50 percent the previous year.
Gross profit increased by 11.01 percent to N27.68 billion, which means the company effective in managing direct costs attributable to projects. Gross profit margin was 10.49 percent.
The company has also utilized the resources of share holders in generating higher profit as return on equity (ROE) increased to 19.68 percent in the period under review as against 3.96 percent in 2014.
Rising costs accentuate Millers woes
Flour Mills cost of sales jumped by 7.60 percent to N236 billion in 2015 from N219.35 billion in 2014. Cost of sales ratio was flattish at 89 percent in the period under review.
Millers in Africa’s largest oil producer have the largest cost margins as bad roads, depreciations, huge energy costs continues to spiral production costs.
The company’s finance costs increased by 13.43 percent to N17.40 billion in 2015 compared with N15.33 billion the previous year. Total assets fell by 4.42 percent to N327.66 billion.
Flour Mills share price closed at N19.88 while market capitalization was N52.17 billion.
BALA AUGIE
