The recurring loses of Dangote Flour Mills Plc, one the biggest millers in Africa’s largest economy calls for an urgent cost control mechanism, a strategy analysts say will revert the company to the path of profitability as consumers pull back on spending.
This strategy is expedient given investors crave for a company that pays steady dividends from profits.
But Dangote Flour Mill may not pay dividends as it posted a loss after tax (PAT) of N9.11 billion in the first nine months through June 2015, from N4.32 billion the previous year, representing a 110.08 percent increase.
The Miller has been recording such losses since September 2012.
The last time it posted profit figure was in 2011 when it ended the year with a profit of N649.07 million.
Dangote Flour’s loss of 2012 coincided with the year Tiger Brand, South Africa largest Food Company bought majority stake in the Nigerian miller.
Due to Dangote Flour’s faltering performance and excess milling capacity, Tiger has impaired the Nigeria miller’s value by ($82 million) which translates to holding company losing half of its investments.
To further exacerbate the already anaemic position of the company is the devaluation of the naira that made imported raw material expensive, insurgency in the north part of the country that crimpled consumer in that region and weak consumer spending stoked by rising inflation and hike in the price of fuel.
Dangote Flour’s sales were down by 11.57 percent to N58.67 billion in 2015 from N66.28 billion the previous year.
The company’s cost to income ratio (CIR) was as high as 0.91 percent, which is higher than the 0.84 percent recorded last year.
This means the company spent 0.91 naira to produce N1 of its product.
Gross profits were also down by 44.47 percent in 2015.
BALA AUGIE
