Flour Mills of Nigeria, the country’s biggest flour miller by market value, grew its Q1 2019/20 profit by the most since 2016, helped by a pick-up in sales, lower tax expense and a significant cut in borrowing cost in the period.
The miller saw profit rise by 16.11 percent to N4.24 billion compared to N3.65 billion in the same period last year. The latest performance halts a decline in the company’s Q1 bottom-line which started in 2016.
Shares of Flour Mills gained 6.07 percent to close at N14.85 per share Thursday.
Flour Mills which is bouncing back from a 19.48 percent decline in its first- quarter profit last year is reaping the benefits of deleveraging its books by 36 percent year-on-year in the review period while sales turned the corner to a 5-year high.
The company had said it would continue active balance sheet management. “The objective is to achieve additional reduction in finance costs in the current year,” the miller said in an investor presentation on its website.
As at the end of the April-June period, finance cost had been cut down to N4.55 billion compared to N6.20 billion last year. This follows a 30 percent cut in borrowing cost to N22.9 billion in the full year to March 2019 from N32.7 billion in the corresponding period of 2018.
Revenue growth grew 1.2 percent as the miller reversed a 10.7 percent decline in sales last year to post N134.75 billion in its recently concluded quarter.
The maker of Golden Penny range of food products and Golden Fertilizers noted a drag in its food segment which slowed some 3 percent. Even though Support Services slowed, Agro-Allied and Sugar segments improved.
A faster increase in cost of sales than revenue rose meant Flour Mills pared its gross profit which shrank for the first time in more than three years. Cost of Sales saw an uptick of about 2 percent and gross profit fell to N16.47 billion.
The Miller was able to retain N12.23 from every N100 sales after adjusting for direct cost in Q1. This is marginally less than N12.98 per N100 last year.
The combined effect of a weaker gross profit and increase in Selling, General and Administrative expenses trimmed operating profit by some 12 percent to N9.9 billion.
However, a plunge in finance cost of 27 percent elevated the company’s profit before tax by 5 percent year-on-year to N5.5 billion.
Tax expense fell 19.08 to buoy profit after tax to N4.24 billion in the 3 months. Net margin improved as Flour Mills retained N3.14 from every N100 sales compared to N2.74 realised in 2018.
Consequently, earnings per share rose to N1.03 per share in Q1 2019 compared to 90 kobo last year.
