Dangote Flour Mills 463.05 profit surge validates growth strategy

Dangote Flour Mills Plc’s 463.05 percent surge in half year profit amid a volatile and tough macroeconomic environment has validated management growth strategy.

Net income for the first six months through June surged to N5.75 billion from N1.02 billion the previous year.

Sales spiked by 145.27 percent to N64.85 billion, thanks to an excellent  distribution, marketing, advertising strategy, and creative price increase.

Analysts say consumer goods firms had hiked the price of products in order to fend off the impact of rising cost of production on bottom line (profit).

Consumer goods firms in Africa’s most populous nation have been grappling high cost of raw materials due to the devaluation of the currency, dearth of dollars, and shortages of gas supply at factory caused by incessant attacks by militants on oil facilities in the oil rich Niger Delta region.

Nigeria’s economy contracted by 0.52 percent in 2016, its worst recession in 25 years while inflation for the month of June stood at 16.10 percent.

Despite the aforementioned challenges, Dangote Flour Mills maintained an improved margins as it was able to translate strong sales into a higher profit.

Net margins rose to 8.80 percent in June 2016 as against 3.85 percent as at June 2016. Operating profit margins moved to 23.54 percent in the period under review from 17.70 percent the previous year.

The Nigerian miller was able to manage direct costs attributable to projects as gross profit spiked by 226.28 percent to N15.28 billion in the period under review.  Operating profit or  earnings before interest and tax (EBIT) surged by 304.59 percent to N10 billion.

With the return of Dangote Industries Limited as the majority core investor, new capital injection, reconstituted board and a new management team, Dangote Flour Mills (DFM) is now one of the most-sought after equities on the Nigerian stock market.

Dangote Group had in 2012 sold 63.35 per cent of its equity stake in Dangote Floor Mills to Tiger Branded Consumer Goods Plc in a 181.9 million dollar deal.

In February 2016, Dangote Group reacquired 65.6 per cent majority equity stake in the former Dangote Flour Mills Plc, now rebranded Tiger Branded Consumer Goods Plc.

The company was able to utilize the resources of its owners in generating higher profit as return on equity (ROE) increased to 19.91 percent in June 2017 from percent 9.20 percent the previous year.

From an initial installed capacity of 500 MT per day at its Apapa mill, Dangote Flour has expanded rapidly by opening, in quick successions, three other flourmills in Kano (2000), Calabar (2001) and Ilorin (2005).

All mills have a combined milling capacity of 4,800MT per day. Dangote Pasta Limited, Dangote Noodles Limited and Dangote Agro Sacks Limited are fully owned subsidiaries of the Dangote Flour Group.

Dangote Flour Mills shares, which have gained 22.59 percent so far this year, dropped 0.19 percent on the Lagos bourse on Wednesday, valuing it at N26 billion.

BALA AUGIE