Recently, Flour Mills of Nigeria Plc has released its unaudited financial statement for the 2023 half year (H1) period. The group’s H1’23 results at the Nigerian Exchange Limited (NGX) show strong revenue growth across business segments, despite the challenging macroeconomic environment. Gross profit reached N33.2billion, up from N25.7billion in H1’2022; up 29.18percent.
Top-line growth propelled by favourable mix and some exchange related pricing
When compared to H1’22, Flour Mills overall revenue in H1’23 increased by 38percent to N721billion from N522.821billion, propelled by a favourable mix and some exchange related pricing. Strong revenue growth averaging 36percent across all business segments. Operating performance in the Food segment remained solid, notwithstanding a challenging environment with increased input prices and a somewhat softening volume base.
Golden Sugar recorded double-digit growth in revenue (51percent) and a solid profit growth due to increase in volume and various customer engagement efforts to drive customer loyalty. In the review period, Flour Mills of Nigeria Plc gross income of N68.787billion in H1’23 as against N54.415billion in H1’22, represents 26.4percent increase. Though its after tax profit was down to N5.7billion in H1’23 from N10.528billion in H1’22, a dip by 45.9percent; but Flour Mills of Nigeria Plc operating profit of N30.326billion in H1’23 as against N24.055billion in H1’22 implies an increase of 26.1percent.
Share price still outperforming market
The N30.30kobo per share the company closed last week on the Nigerian Exchange Limited (NGX) implies positive return of +6.9percent year-to-date (YtD) as against the overall market performance indicator with +2.80percent return same period.
Operational review
In the review half-year period, the group’s operating performance in the Food segment remained solid; profit before tax for Agro-Allied remained at the level achieved the previous year; Sugar segment recorded a significant rebound compared to Q2 2021 as anticipated due to a normalized competitive playing field, increased route to market expansion into both new and rural markets, and increased customer engagement.
CEO speaks on H1’23 result, group’s strategic imperatives in years ahead
While commenting on the H1’23 result and the group’s strategic imperatives in the years ahead, Boye Olusanya, Group Managing Director/Chief Executive Officer, said: “FMN continues to meet the needs of the consumers with our sustainable route-to-market structure and new product initiatives across our touchpoints. As we can see in the H1 22/23 report, the Sugar segment recorded a significant rebound compared to H1’21/22, a clear demonstration of the Group’s continuous and significant investment in the sugar value chain and across all our key value chains and sectors. As the Group continues to make headway in our backward integration activities through various strategic efforts, we remain committed to feeding the nation, every day.”
“Also, our investment in product innovation and supply chain optimization was sustained in furtherance of the execution of our long-term strategy. As part of the Group’s strategic roadmap, FMN continues to put in place a business continuity plan to safeguard its supply chain and food production processes to ensure that Nigerians can continue to have access to their daily nourishment,” he said.
Read also: Flour Mills reports N33.2bn H1’23 gross profit
Business outlook… and the Group
The Group said it is dedicated to achieving strategic growth opportunities, both organic and inorganic, within the sector. “Commodity prices and input costs are decreasing as the impact of the war between Russia and Ukraine is lessened with the overall supply chains adjusting. Any potential FX adjustments over the next months are being closely followed. Performance of Sweeteners is foreseen to strengthen over the next two quarters, with the value chain being very attractive in the long run,” Flour Mills noted in its H1’23 results presentation.
It further noted that, “Honeywell operations are stabilising and anticipated to be a very strong revenue and profit stream in the long run after integration of the operations and the balance sheet restructuring are concluded.”
The Group said it will continue to fill the needs of the consumers with route to market and new product initiatives across the group, investment in production capacity and increasing aggregation/sourcing. Increase operational efficiency with accelerated plans for cost optimisations across the Group to ensure competitive product offerings and profitability in the new operating environment.
Flour Mills is integrating the Honeywell business to realise the synergies anticipated with focus on restructuring the balance sheet to reduce FX exposure and ensure manufacturing stability. This is expected to lead to strong results in the long term.
Incorporated in September 1960 and quoted since 1978 on the Nigerian Stock Exchange (now Nigerian Exchange Limited), Flour Mills of Nigeria (FMN) Plc, owners of the iconic Golden Penny Food brand is one of Nigeria’s leading food and agro-allied companies. With a broad basket of food products and robust pan-Nigerian production, distribution, and supply chain network, Flour Mills of Nigeria is a fully integrated and diversified food and agro-allied group.
FMN group strives in its purpose to “Feed the Nation, Everyday” through its five core food value chains: Grains, Sweeteners, Oils and Fats, Proteins, and Starches. FMN creates value along the entire food chain with its “farm-to-table” model by providing inputs and know-how to farmers, aggregating and sourcing crops and raw materials to supply its world-class processing facilities across Nigeria, and distributing its innovative food brands to its customers.
Food segment … Increasing B2C revenue contribution
Business-to-Consumer (B2C) volume contribution increased from 34percent in Q2’22 to 38percent in Q2’23. The following accounted for the 32percent growth in revenue: increased sales through mix and selective pricing behind FX; whereas overall food volumes somewhat softened. Increased rural penetration through deployment of additional containers, tricycles and sales force automation. Regional penetration of Breakfast cereal which expanded into East and Abuja and “Auntie B” Semo into the East and North.
Rebalance demand to smaller pack sizes and cheaper products within the group’s portfolio. It is worthy to note that the Honeywell business is being restructured and integrated into the Flour Mills of Nigeria Plc group. Focus has been on ensuring the commercial strategy and resulting integration plus manufacturing stability. This together with restructuring the balance sheet plus reducing the FX exposure and realising synergies are the current focus areas for Flour Mills of Nigeria Plc.
Agro Allied segment… Double digit revenue growth sustained in H1’23
The Oil and Fat segment grew revenue by 98percent due to increase in volumes arising from amplified toll milling activities in the North and West to meet up with customer demand. Flour Mills fertilizer business recorded a very strong 74percent growth in revenues and 50percent profit growth. This was driven by: Increase in volumes and reduced costs in Q2’23 following the commissioning of the new Fertilizer blending plant in May 2022 with 90MTPH capacity; continued commercial nimbleness and ensuring customers’ needs are addressed. Introduction of new SKU in Kaduna plant; our animal feeds business increased revenue by 18percent on the back of Increased Route-to-Market activities. In August 2022, a Feed milling plant with 120,000 MTPA capacity was commissioned in Kaduna; this has contributed to increased volume and reduced cost in Q2’23. In addition, the new Kaduna Eagle Plant also began production with a capacity of 120,000 tons.
Sugar segment… Significant rebound in PBT
Golden Sugar recorded double digit growth in revenue (51percent) due to increase in volume and various customer engagement efforts to drive customer loyalty. Consequently, there was a rebound in the segments profit before tax behind the revenue growth and a more normalized trading environment. The group continues to see persistent demand for its Brown sugar products from industrial customers in the North. Additionally, the business continues to progress on its backward integration initiatives on Sugar production by engaging in continuous development of the upland area to expand the area under cultivation. The Sugar business has been unaffected by the recent flooding with the interventions prepared over the last two years withstanding the very strong flooding this year. The performance of Sugar Division, the group noted, will continue to strengthen over the next two quarters, with the value chain being highly attractive in the long run.
Support Segment… Revenue growth despite intense competition
The packaging business delivered 12percent growth in revenue during the review period, despite an overall reduced demand for consumer goods packaging material. The business continues to prioritize high value bags towards margin build up. Golden Transport Company, the transportation and logistics business achieved 24percent revenue growth driven by acquisition of new trucks and management of Honeywell trucks. The Port business presented solid results when neutralizing the FX revaluation impact. The business improved relationship with regulatory agencies to accelerate berthing and sailing of vessels and involved in partnerships with neighbouring terminals.
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