Despite prevailing economic headwinds and the difficult operating terrain of Apapa, Flour Mills of Nigeria (FMN) Plc, owners of the popular Golden Penny Food brand and one of Nigeria’s leading food and agroallied companies reported strong growth in the year ended March 31 2020.
With a remarkable growth in all three key segments of Food, Agro- Allied and Sugar, FMN finished the year strong with a record 184 percent growth in after-tax profit. The highest profit growth rate since 2014.
The last time the Group Company recorded success of that magnitude was in 2016 when it reported a growth in profit after tax of 70 percent.
With a broad basket of food products and robust pan-Nigerian production, distribution, and supply chain network, FMN in 2020 recorded a N7.4 billion or 184 percent increase in Profit After Tax (PAT)), from N4 billion in 2018/2019 to N11.4 billion in 2019/2020. This was almost triple the 72 percent growth recorded for its Profit Before Tax.
Analysis of FMN’S 2020 financial revealed that its Agro-allied division was a major catalyst in the growth record reported in the review year as the business segment of the company reached profitability. This was largely due to the consistent and focused investments that have been made in its locally sourced segment over the last few years. The management’s strategy has been to continue to stimulate organic growth in all segments of the business.
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In the year when many Nigerian companies recorded revenue decline amid the country’s slow economic growth, Flour Mills of Nigeria reported a revenue increase by 9 percent year-onyear ( YOY) from N527.4 billion the previous year to N574 billion in 2019/2020.
The revenue reported by FMN in 2020 is in line with the company’s 2019 outlined ambitious business plan for the next five years which is targeted at doubling its business within the period to achieve a revenue of over N1.2 trillion by 2024.
The Agro-allied segment of FMN’S business contributed the most revenue in the year under review. Revenue from the business arm increased by 20 percent , from N88.1 billion the previous year, revenue from Agro-allied rose to N105.5 billion in 2020.
The increase in revenue contribution from Agro-allied division was largely driven by the company’s investment strategy aimed at ensuring profitability and improving local content in the group’s product portfolio.
Flour Mills in the past few years invested about N95 billion in its Agro-allied business. In 2016 alone, it injected N45 billion in its Sunti Golden, one of only two sugar mills in the country capable of producing crystallised sugar from locally grown sugar cane. This was an addition to the already invested N50 billion in a state-of-the-art sugar refinery in Apapa capable of refining up 2000mt of sugar per day.
The strategy of the business expansion model of FMN, which has over the years diversified into fast- moving consumer goods, is not only organic growth but acquisitions and partnerships.
Breakdown of the 2019/2020 financials of FMN revealed the Agro-allied division turned profitable following a repositioning and prior year funding of the key-value chains of Oils and Fats, Proteins and Starch businesses.
Revenue was driven by volume growth predominantly in Oils and Fats (Premium Edible Oils), Proteins ( Premier Feed) and Golden Fertilizer. Strong profit growth in Oils and Fats and Proteins with Gross Profits more than doubled in both segments on an annual basis (with some IFRS9 adjustments in Q4 last year).
With an 18 percent revenue growth in the year ended March 31 2020, the Sugar segment of FMN group was closely behind the revenue contribution from Agro-allied business. From N82.7 billion in the year before, the Sugar arm of the Group increased to N97.6 billion.
The revenue growth recorded from the Sugar business was driven by an increase in volumes. The improved operational efficiency in Sunti Golden Sugar Estates by commencing mechanical harvesting, strengthening the cane haulage facilities and installing a vacuum pump condenser resulted in 15 percent increase in plant output.
To increase area cultivated for sugarcane production from 2,800 to 3,500 hectares FMN introduced 1.5ton Jumbo bag of sugar in September 2019 and VitaminA Fortified Sugar in January 2020. This was combined with the improvement in distribution channels that was achieved through the deployment of smaller trucks for delivery time improvement.
The Food segment of FMN business also reported a revenue contribution increase in the year ended March 31 2019/2020. The Food segment saw a 7 percent revenue growth from N335.6 billion the previous year to N358.4 billion.
Accelerated business-to-consumer (B2C) growth due to new product launches, expansion of production capacity and regional SKUS were the major driver of the revenue increase. Meanwhile, FMN recently launched value brand products – Auntie B pasta and semolina to ensure right regional offerings and affordability also the road to market strengthening and product quality focus further enabled revenue growth.
Dividend payment
Following the good performance reported for the year ended March 31 2019/2020, the Board of FMN Group recommended a dividend of N1.40 per ordinary share of 50 kobo each. The proposed dividend is 17 percent increase when compared to 2019 and 40 percent as when compared to 2018.
According to the Group Company, the proposed dividend was based on confidence in the business. The total proposed dividend in 2020, although still subject to AGM ratification is N5.7billion (N4.9billion in2019).
If approved, the dividend which will be payable on Monday 14th September 2020 to shareholders, whose names appear in the Register of Members at the close of business on Friday 14th August 2020 will not be subject to withholding tax. According to the company, shareholders who have completed the e-mandate Activation Forms will receive a direct credit of the dividend into their bank accounts on the payment date.
Business outlook
Quoted on the Nigerian Stock Exchange since 1978 FMN group strives in its purpose to “Feed the Nation, Everyday” through its five core food value chains: Grains, Sweeteners, Oils and Fats, Proteins, and Starches.
The company which creates value along the entire food chain with its “farm-to-table” model by providing inputs and knowhow to farmers, aggregating and sourcing crops and raw materials to supply its world-class processing facilities across Nigeria plans to continue to Feed the Nation every day with the focus on local content and value add.
According to FMN, it has a committed execution of the turnaround strategy for AgroAllied Division with the aim of ensuring profitability and improving local content in the group’s product portfolio. It also plans to remain focused on increasing operational efficiency with accelerated plans for cost optimizations across the group to ensure profitability in the new operating environment.
Expanding the capability of the edible oil refinery to meet up with new products development in line with our long-term strategy to stimulate organic growth and grow the reach of its animal feed products is also one of the plans of FMN, going forward.
FMN also said that it is looking at accelerating expansion in the B2C segment with multiple product offerings across its five key value chains.
“We will remain focused on increasing operational efficiency within the group as we continue to implement our accelerated cost optimization plans across all businesses to ensure profitability in the new operating environment,” Paul Gbededo, group managing director of Flour Mills, said.
The company assured its stakeholders that it will continue to focus on expanding the Food division with investments in Oils and Fats with new product offerings and additional capacity and to further grow one of the largest Animal Feed structure in Africa.
