Achieving food security has been a priority of successive governments in Nigeria, and food-processing companies have in recent years also tried to key into this objective in different ways.
Over the last six years, Paul Gbededo has led the charge to make food more readily available to millions of Nigerians, through Flour Mills of Nigeria (FMN) Plc where he has been CEO since April 2013.
“I believe that we have to come to the realisation that we can’t continue to depend on just the revenue from oil as a nation,” Gbededo told BusinessDay in a recent interview. “Likewise, the era, when we had to rely on the importation of food and raw materials, is gradually passing.”
According to him, Nigeria’s agriculture sector is witnessing increasing support in the forms of enabling policies. The Agriculture Promotion Policy and the Economic Recovery and Growth Plan, for example, have both focused heavily on improving food security and achieving self-sufficiency in food production.
The growth in this sector, though marginal, is incremental, and for Gbededo “is a good sign”. For Nigeria to see the type of development that is expected in food production there is also need for commensurate investments that will in turn lead to increased production and create value in the long run. The long-term sustainability of Nigeria’s agriculture depends on its linkage to industry, he said.
FMN, which he leads as CEO has to an extent, been living up to the requirement of massive investments to drive agricultural and industrial productivity across Nigeria. The company’s over N60 billion investments in Sugar production, in particular, recently won the praise of Niyi Adebayo, minister of Industry, Trade and Investment.
“I am quite impressed with the level of investment and planning that has gone into this enterprise, also because of the number of people that are employed here,” said Adebayo. “Efforts like these go a long way in reducing the number of unemployed Nigerians”
The Sunti Golden Sugar Estates, owned by FMN’s Golden Sugar Company, is described by the company as Nigeria’s only Greenfield Sugar investment under the Sugar Masterplan that is currently producing raw sugar.
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Since the implementation of the Sugar Masterplan, the Golden Sugar Company (a subsidiary of Flour Mills PLC) has invested heavily and productively towards the goal of helping Nigeria achieve self-sufficiency in sugar production.
When the National Sugar Development Council (NSDC) had its mid-term review in 2017, Sunti Golden Sugar scored 58 percent in the targets set in the backward integration plan, including number of projects, new sugar factories, land developed, land under cane, out-grower farms, sugar produced and job creation. It came ahead of Dangote, which scored 45.8 percent and BUA, which scored 17 percent.
Under Gbededo’s leadership, FMN’s recent giant strides have not been limited to Sugar. There have been efforts to become a major player in the palm oil value chain as well where like many other commodities, Nigeria has a significant deficit.
Flour Mills of Nigeria (FMN) according to information gleaned from a factsheet, is stepping up its position in the oil palm space, with an ambitious plan for a tenfold increase of its current production within about seven years. Crude Palm Oil (CPO) production by the company, which is currently 2,700 tons, is projected to increase to 22,000 tons by 2027, an almost tenfold increase within seven years (2020 – 2027) once the mill is commissioned and projected to grow to 52,000 tons by 2030.
Located in Edo state, the palm oil investment by FMN currently sits on 11,600 hectares spread across three locations; Iguobanor and Iquiye (Agri Palm 1) and New Land (Agri Palm 2), which are 25 kilometers apart.
In 2014, the company unveiled what it describes as one of the biggest, automated edible oil refineries and the first margarine plant in the country. The operation of the refinery is supported with palm oil from a 4,500-hectare oil palm plantation in Edo State together with soybean sourced by its aggregation teams across the country.
In 2017, as part of a strategic plan to develop a centrally located grains hub in Nigeria, the company commissioned one of the biggest and modern Sorghum milling plants in Kano. The mill has an installed capacity of 100,000 metric tons per annum and engages a network of about 10,000 farmers in an out-growers scheme, creating jobs for at least another 40,000 people, and small-scale businesses.
For Gbedeo, the 2018 commissioning of Sunti Sugar Estates remains “a shining example of the magnitude of investments” level of activities by the company in aiding food security.
Professional Background
Gbededo’s 37-year career with FMN Group started at Nigerian Bag Manufacturing Company Plc (1982 – 1998). There, he acquired extensive experience serving in various managerial positions as Process Control Manager, Production Manager, General Manager Production and became the first Nigerian Production Director in 1993.
A Fellow of the Polymer Institute of Nigeria and former Managing Director of FMN’s Agro-Allied Business, Gbededo was appointed the Group Managing Director /Chief Executive Officer of Flour Mills with effect from 1st April, 2013.
According to his profile on the company’s website, he was educated at the Polytechnic of North London, UK, where he obtained Graduateship of Plastic and Rubber Institute and Associateship of National College of Rubber Technology in 1980, and holds MSc. Degree in Polymer Technology (1981) of Loughborough University of Technology, UK.
An alumnus of the Lagos Business School’s Advanced Management Programme 3, he attended Pasta Machinery Use, Maintenance and Operation at FAVA, Italy in 2005.
Gbededo who is credited for his pioneering role in fertilizer, pasta and rice production, in 1998, became General Manager/Director in charge of fertilizer operations, pioneering development of the product, “Golden Fertilizer”. He also served as a pioneer General Manager/Director for Golden Pasta Company Limited, a former subsidiary (now a division) of Flour Mills.
In July 2012, Paul was elevated to the position of Managing Director, Agro-Allied business with responsibility to implement FMN Group’s backward integration policies, programmes and initiatives. Less than two years later, he was appointed the company’s GMD/CEO.
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Minor upsets, but future remains brighter
FMN has grown its revenue by 61.88 percent since 2014 (the first full year after Gbededo assumed leadership). The consumer goods firm posted a revenue of N527.4bn in 2019 business year compared to N325.79bn five years ago. However, profit declined by 25.48 percent when the 2019 business year is compared with 2014. The decline first occurred around 2016 when Nigeria’s economy entered a 5-quarter recession, and could be attributed to the effects of recession.
On a year-on-year basis, revenue declined 2.81 percent from N542.67bn last year. However, the future appears to look better. With Nigeria’s land borders shut, the shift from rice, a staple food many consider a favourite, to a substitute means pasta makers like FMN could gain.
For FMN, “Shifting demand to pasta suggests stronger earnings in 2020,” noted analysts at Lagos-based Chapel Hill Denham.
According to the analysts, the renewed demand for pasta is expected to boost food turnover in 2020, as the recent border closure has impacted rice importation, inducing a shift in demand to Pasta (Spaghetti, Macaroni etc).
Chapel Hill Denham’s market price survey indicates that FMN’s Golden Penny Spaghetti retail price has increased to an average of N235/500grams stock keeping unit (from an average of N200). This is expected to lead to a higher sales volume in the consumer good firm’s food segment within the first half of next year.
The analysts also expect the Sugar and Agro-Allied segments to maintain current growth trajectories (grow by 15.1 percent year-on-year and 5.1 percent year-on-year respectively to N44.94bn and N49.40bn in H1-20) pushing 2020 turnover to N548.32bn, up 4.0 percent year-on-year from N527.41bn in 2019.
However, weaker wheat and CPO input prices are likely to marginally support gross margin to 11.8 percent in 2020 from 11.7 percent in the first half of next year and 10.1 percent in 2019 as revenue rises by 4.0 percent year-on-year.
While Chapel Hill Denham’s projection shows a 0.4 percent growth in FMN revenue and a decline in the company’s top-line in the period, they however expect profit to grow 16.4 percent to N5.9bn in the first six months of next year.
Chapel Hill Denham said in its report that it retains a buying rating on the stock and raised its target price to N25.58 from N17.99. The new TP represents a potential total return of 38.7 percent (capital gain of 32.5 percent and a dividend yield of 10.3 percent).
The FMN Group’s mantra, “Feeding the Nation, every day,” is according to the company, at the heart of its strategic decisions on what to produce, how and where factories are set up, the level of care that is put into products, and how they interact with host communities and the wider environment.
“Our goal to be involved in all stages of the food value chain has over the years continued to inspire our investments in the development of critical infrastructure that is required to support our target value chains,” Gbededo told BusinessDay.
CALEB OJEWALE
