Flour Mills of Nigeria’s Q3 profit rises 3.4%, set to raise N20bn debt

Flour Mills of Nigeria’s revenue for the nine months ended 31st December 2019 increased 7.9percent to N432.47billlion from N400.64 billion. Cost of Sales increased 6percent to N375.64 billion from N354.04 billion in the same period in 2018, leaving gross profit at N47.82billion from N46.59billion in the same period in 2018.

Selling and distribution expenses jumped 7.9percent to N6.4billion from N5.93billion in the same period in 2018, with administrative expenses surging to N17.26 billion from N14.93billion in 2018. Net profit increased 3.4percent to N8.16 billion from N7.89 billion.

Revenue from its Food segment increased 2.9percent to N262.09 billion from N254.57 billion, Agro-allied segment ballooned 19.6percent to N81.31bn from N67.96billion. Sugar value chain increased to N67.61bilion from N59.96billion, sadly revenue from support services plummeted to N12.45 billion from N18.53 billion.

During the period, the group’s expense on advertisement surged to N1.48billion from N1.39billion.

Flour Mills in a notice to the Nigerian Stock Exchange dated January 16 announced the opening of a new N20bn bond offer under its N70bn Bond issuance programme, the first since November 2018, when the company raised a total of N20.1bn through N10.1bn 3-year bond at 15.50percent and N10.0bn 5-year bond at 16.00percent. The bookbuild process for this offer closed on Friday, 7 February 2020

The choice of bonds by Flour Mills is to lengthen the maturity profile of its debt in a low-interest-rate environment, and also reduce refinancing risk of short-dated securities.

According to the management, proceeds would be used refinance existing short-term debts increase efficiency of its balance sheet. Analyst at Chapel Hill Denham estimate FMN’s total debt at N133bn.

“This will lead to a debt-to-equity of 86percent and net debt-to-EBITDA of 2.14x, from 73% and 1.77x respectively prior to the issuance,” the company said.

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