Investors responded to the poorer than expected results of Dangote Flour as there was a 11.76 percent loss in total market value of the company since results were released on Monday.
The company could not turn around the run of bad results posted in the earlier quarters of the year and this was reflected in their full year performance.
Dangote Flour Mills Plc result was unimpressive as revenues declined from N124.69 billion to N112.34 billion representing a 9.91 percent reduction of their topline. Cost of sales increased by 7.4 percent in 2018 from N95.06 billion to N102.09 billion leading to a 65.43 percent slump in gross profit, the first since 2014.
The company’s inflows from core business operations emanate from the sales of flour and pasta products. Flour sales, which contribute over 86 percent of total revenues, fell from N107.81 billion in 2017 to N96.97 billion in 2018 representing a 10.05 percent decline. Pasta sales dropped by 8.98 percent from N16.88 billion in 2017 to N15.36 billion in 2018.
Cost of sales increased rapidly due to the growth in cost of work in progress and raw materials which tripled from N7.91 billion in 2017 to N25.98 billion in 2018, distribution causing the dip in gross profits.
Gross profit margin significantly reduced from 23.46 percent to 9.12 percent year on year which led to operating profits falling to less than half a billion naira from N22.09 billion reported in 2017. The N398.34 million operating profit represents 97.85 percent declined year on year.
After a N33.18 million tax credit, Dangote flour made loss of N1.15 billion for 2018 financial year compared to 2017 profits of N15.12 billion. The stock was the second-best performing stock of the first quarter of 2018 but led the laggards in market at the close of business on Monday losing 9.80 percent of its market value. An extra 2 percent loss in market value left the price at N9.00 at the close of trading on Tuesday.
Analyst had expected a poor performance based on the economic climate and the heat it brought on the consumer goods market but expected the management of the company to keep the company profitable. Dangote Flour failed to declare dividends for 2018 as retained earning slipped into negative territory moving N2.12 billion in 2017 to a deficit of N650.69
million at the end of 2018.
Dangote Flour Mills Plc (DFM) commenced operations in 1999, as a division of Dangote Industries Limited (DIL) – one of Nigeria’s largest and fastest growing conglomerates. Dangote Flour Mills operates in Nigeria’s highly competitive wheat flour and pasta making sector, alongside some deep-pocketed rivals such as Flour Mills of Nigeria, Olam International,
and Honeywell Flour Mills.
Ifeanyi John
