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Flour Mills: Optimism trails future growth amid impressive 9 months scorecard

FMN, the impactful driver of food self-sufficiency in Nigeria for over six decades

Recently, Flour Mills of Nigeria Plc released its unaudited nine months (9M) financial results for the period ended December 31, 2021, showing impressive growth across top-to-bottom line figures. The country’s biggest flour miller by value demonstrated solid performance across Food, Agro-Allied and Support Segments delivering topline growth of 51percent in third-quarter (Q3) and 49percent in nine months, behind strong volume growth and mix.

It is noteworthy that persistent operating performance in the Food segment; continuous improvement in the Agro-Allied and Support segments alongside strong volume growth resulted in Flour Mills of Nigeria’s impressive Profit Before Tax (PBT) of N25billion in 9 months and N9.8billion in Q3 – up 7percent and 8percent respectively.

Agro-Allied contributed 37percent (N9billion) to the Group’s Profit Before Tax (PBT) following increase in local demand and increased export operations.

The Group’s notable financial performance across its key business segments was supported by continuous product innovation, enhanced capacity utilisation and effective route to market strategies. Flour Mills of Nigeria Plc recently signed an agreement for the proposed combination with Honeywell Flour Mills Plc to reinforce its position as the leader in flour and pasta manufacturing. The stock price at N28.55 per share as at Monday January 31 represents positive return of 0.7percent in January.

How Flour Mills wins

The Group wins by continuous product innovation and improvements; ensuring product availability; creating good consumer experience; and strong supply chain support. For instance, Flour Mills has accelerated progress in the small pack size categories for noodles; introduced smaller SKUs for Golden Penny Margarine (“250gX6”, “250gX12”, “450X12”), Golden Fertilizer, BAGCO; deployed 60 new tractors in the transport division to improve productivity; launched a new product “Broiler plus” in Kano State in the Animal feeds business; and focused on RTM redistribution investments with additional 22 new vans in Q3.

It ensures continuous product availability for existing and new SKUs in the market via regional distribution centers. It has also enhanced consumer engagement and persistence on product quality for all the Group’s product categories; and strong commitment to feeding the nation every day; as well as supply chain support such as dealer warehousing, van financing, advance payment to suppliers, among others.

Optimistic seeing significant improvements in cash from operations

“Successful sourcing of local commodities during harvest period affects Q3 cash position. Cash from operations was largely impacted by the increase in working capital following the very successful aggregation of local raw materials to source next year’s demand during the harvest (lowest level in cost cycle). We will see significant improvements in cash from operations after the end of the aggregation period as the inventory is turned over/ converted to sales, with a natural local sourcing cycle during the year”, Flour Mills said in its Q3 2022 investor presentation.

Flour Mills and Honeywell –Two trusted and leading iconic brands in Nigeria, creating a strong National Champion

Read also: Northern Nigeria Flour Mill grows half-year profit by most in 6years

Flour Mills of Nigeria Plc (FMN) through its affiliates sought to acquire circa 72percent equity stake in Honeywell Flour Mills Plc (HFMP). FMN and Honeywell Group have executed an SPA in this regard. In addition, FMN through its affiliates will acquire FBN Holding’s circa 5percent stake in HFMP. Post-acquisition, FMN will emerge the majority shareholder at circa 77percent with operational and managerial control. The transaction was valued at a total estimated enterprise value of N80billion.

The final equity price per share payable to shareholders will be arrived at after adjusting for relevant net debt and other balance sheet movements/adjustments. Strong potential synergies resulting in: extended footprint enlarged customer base, solid market share and better channel penetration; strong combination of market-leading and diverse product offerings to the Nigerian population; and strategically positioned for the opportunities stemming from the African Continental Free Trade Area. Regulatory approvals are in process.

Potential Synergies -Enlarged Group with unprecedented revenues of over a trillion in the near term

Revenue synergies: Increase in shareholder value for both entities; stronger stream of innovation focused on local content offerings; increased geographical reach and market share with additional customers; and diverse range of complementary product offerings in the Group to cater for the growing Nigerian population.

Cost Synergies: Streamlined supply chain and operations of both entities on the back of economies of scale; savings from improved distribution and marketing channels; technology enabled logistics to drive down operating expenses; and enhanced productivity and efficiencies in back offices.

Balance sheet synergies: Reduced cost of debt as a result of enlarged and stronger balance sheet; opportunity to obtain better trade terms from creditors; improved cash to maximise income; and assess to cheaper funds on the back of FMN’s strong credit rating.


The Group remains committed to executing its overall long-term strategy to maintain growth and sustained profitability by increasing local content through product innovation across the 5 core value chains: Grains, Oils and Fats, Proteins, Sweeteners and Starch. The performance of Sweeteners is foreseen to strengthen over the next two quarters, with the value chain being very attractive in the long run. Flour Mills said it will continue to fill the needs of the consumers with route to market and new product initiatives across the group, especially in the B2C segment. FMN will also continue to invest in production capacity and increasing aggregation/sourcing; while also increasing operational efficiency with accelerated plans for cost optimisations across the Group to ensure competitive product offerings and profitability in the new operating environment.

Local wheat development

Flour Mills has advanced in the strategic partnership with Flour Milling Association of Nigeria (FMAN). Flour Mills commenced planting activities for the dry season in Q3 with over 2,100 registered farmers. It successfully planted on 1,145ha in the outgrower programme. 10ha of land prepared and planted with different varieties of bread and durum wheats by the research farm. FMN in conjunction with FMAN and the CBN, commenced the rollout of the anchor borrower programme: began training for over 1,486 farmers at the demo sites; 150,000ha expected to be cultivated by the anchors; and continuous focus on field monitoring and training of farmers including the Anchor borrower farmers.

Sugar segment – Improving trading conditions by end of Q3

Flour Mills recorded 20percent revenue growth in the sugar value chain. The segment’s operating performance was largely impacted by the rise in raw material cost. However, a positive turnaround was started to be seen by the end of the quarter. Brown sugar continues to gain traction following sustained demand from the North and other industrial customers. Flour Mills remains focused on ensuring high quality across its product offerings within the value chain.

Agro Allied Segment – Profit turn around continues and solidifies

Flour Mills recorded 48percent revenue growth in the Oil & Fats value chain driven by: increase in local demand, improvement in export operations, and increased market penetration in the North. It also reported 21percent year-on-year (yoy) volume growth in the Fertilizer business following the introduction of smaller SKUs to address cash outlay considerations for medium and small sized farmers. Notable topline contribution of circa +47percent by the animal feeds value chain largely driven by: the value chain rebranded the cat-fish feeds in order to improve the quality and shelf life of the products; acquired 10 new trucks to support products distribution; and launched a new product “Broiler plus” in Kano State, which is beginning to gain traction. The Starch value chain commenced cassava production to improve its backward integration strategy and ensure increase availability of raw materials.

Support Segment – Solid revenue growth despite intense competition

Significant revenue and profit growth in the support segment was largely driven by increased demand in Bagco, and significant profit growth, following: increased demand for locally produced packaging material; focus on high value products; increased focus on RTM for FMN innovative products such as Zero Fly; and continuous improvement in production planning to meet harvest season demand. The port business performed well with topline growth. Further improved customer response time and accelerated discharge operation continues to strengthen its market position; while FMN deployed 60 new trucks in the transport division to improve productivity, in addition to continuously preventive maintenance to ensure effective performance of the trucks.

Management comments

Commenting on the quarter three (Q3) financials, Omoboyede Olusanya, the Group Managing Director, said: “The Group remains committed to executing its overall long-term strategy to maintain growth and sustain profitability by increasing local content through product innovation across our core value chains, as evidenced by the third-quarter’s earnings trend.

“In our new operating environment, our increased operational efficiency and accelerated optimization plans have resulted in competitive product offerings and profitability. We will continue to invest in production capacity and make investment decisions that will strategically position the group for the opportunities that will arise from the African Continental Free Trade Agreement,” Olusanya noted.

Analysts’ views on the 9 months scorecard

Chinma Ukadike, analyst at Vetiva Research in a February 1 note on Flour Mills unaudited nine months (9M) financial results for the period ended December 31, 2021 retained their BUY rating for the stock with Target Price (TP) of N35.61 per share representing an upside potential against N28.55 per share it had traded.

“In its recently released 9M’21 earnings report, Flour Mills of Nigeria Plc reported a 49percent year-on-year (y/y) lift in revenue to N825 billion. The company’s revenue growth has been very swift and monumental, growing by a compound annual growth rate (CAGR) of 5percent in the 5 years between financial year (FY) 2016 and FY’2021, with an expected 6-year CAGR of 10percent by FY’2022.

“Supporting Revenue growth is the company’s aggressive expansion strategy, with rapid product innovation across its value portfolio in several segments and accompanying price increases. Flour Mills’ food and agro-allied segments have been quite successful volume-wise, with a combined 17percent y/y growth in volumes,” Vetiva Research analyst noted.

“Accordingly, these segments were majorly responsible for the 51percent y/y growth in topline for the Q3 period. Meanwhile, the company has turned its previously underperforming support segment around, reporting a 16percent y/y growth in revenue from the segment.

“The company continues to embark on expansion initiatives across existing and newer brands in its product portfolio whilst refining its route-to-market channels; we believe that the blend of these strategies would strengthen volume roll out in the affected segments and sustain current growth trajectory,” the analyst stated.

Vetiva’s expectation for volume growth across Flour Mills food and agro-allied segments, informs the analysts revenue estimate of N1.1 trillion for FY’2022.