A dollar shortage in Africa’s most populous nation has boosted the sales of Flour Mills Nigeria Plc as the company’s profit surged amid a tough and difficult macroeconomic environment.
The largest miller in the country got a revenue boost as most customers that were unable to source dollars turned to the company for raw materials.
For the nine months ended December 2016, Flour Mills’ sales increased by 47.89 percent to N389.94 billion from N263.67 billion the previous year.
Earnings before interest taxation and amortization (EBITA) surged by 134.42 percent to N27.62 billion as against N11.36 billion the previous year.
EBITA margin moved to 7 percent in 2016 from 4.40 percent the previous year. Gross margin moved to 13.72 percent in 2016 as against 10.50 percent in 2015.
“Everyone is trying to see how to source locally and that is good’’ for Nigerian farmers and processors, said Paul Gbededo Managing director of the company.
“We have almost tripled production in refinery of palm oil, palm kernel and soy bean. Prices have risen alongside demand. Fifteen months ago, one ton of corn was sold for 60,000 naira ($190). Today it is 125,000 naira,’’ said Gbededo.
A sharp drop in oil price since mid-2014 forced the Central Bank of Nigeria (CBN) to introduce capital controls in order to protect the depleting external reserves, curb inflation and stabilize the economy.
The apex bank also banned the importers of 41 items including oil palms, took pick and wheelbarrows.
While authorities have allowed the naira to float after pegging it for 15 months, dollar shortage heightened and the Nigeria’s economy contracted by 2.2 percent in the third quarter of the year, the worst recession in 25 years.
Inflation for the month of December increased to 18.55 percent, the highest in 11 years.
A weak naira or devaluation of the currency that saw the naira lose 40 percent of its value against the U.S currency spiraled Flour Mills’ cost of production.
The Nigerian miller’s cost of sales or input cost increased by 42.54 percent to N336.44 billion in the period under review compared with N236 billion the previous year.
As of last trade the company traded at 17.56, 8.40% above its 52-week low of 16.20, set on Nov 18, 2016.
Flour Mills has invested N50 billion in a state-of-the-art sugar refinery in Apapa capable of refining up 2 000mt of sugar per day. It has also N45 billion in a sugar plant in Mokwa Town in Niger State.
BALA AUUGIE
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