Data obtained from Flour Mills Nigeria (FMN) Plc’s nine-month financial statements for the period ended December 2022 has revealed that the total assets of the FMCG company jumped by 38.24 percent to N971.7 billion from N702.91 billion in the corresponding period of 2022, while its total shareholder’s equity rose to N198.43 billion in the nine-month period of 2023, 7.28 percent up from N184.97 billion in the corresponding period of 2022.
However, during the same period, the company reported its lowest profit margin in eight years on the back of rising input and finance costs.
According to BusinessDay’s findings, the firm’s profit margin declined to 0.90 percent in the nine-month period of 2023, 117 basis points lower than the 2.07 percent reported in the corresponding period of 2022, while profit after tax deductions was down by 41.29 percent to N10.01 billion in 9M’2023 from N17.05 billion in 9M’2022.
The decline was despite revenue hitting its highest in 8 years amounting to N1.11 trillion in the nine-month period of 2023, 35 percent higher than N825 billion reported in the corresponding period of 2022.
“Flour Mills of Nigeria Plc in 9M’2023 achieved over a trillion Naira (N1,114 trillion) revenue for the first time, demonstrating sustained momentum across all business segments compared to the previous year (N825 billion),” the company stated.
Total revenue reported grew on the back of an increase across reportable segments of the company, with the food revenue generating segment accounting for 65 percent of the firm’s total revenue. It grew by 35.5 percent to N724 billion in 9M’2023 from N534 billion in 9M’2022, primarily due to “continued focus on retail expansion and proactive pricing to cushion steep input costs,” according to the FMN.
Driven by robust performance across its categories, it also reported a 38.88 percent increase in its agro-allied revenue-generating segment amounting to N218 billion in 9M’2023 from N157 billion in 9M’2022.
“The Fertilizer business recorded a 64 percent growth in revenues and 82 percent profit growth driven by the commissioning of a new fertilizer blending plant in May 2022. The oils and fat business grew by 54 percent driven by increased volumes due to intensified milling activities while the animal feeds business reported 20 percent topline growth owing to increased product availability.
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Golden Sugar recorded an impressive 34 percent revenue growth; this was achieved due to increased volumes, various customer engagement, and popularity of our locally produced brown sugar,” FMN stated in a statement.
However, the cost of sales claimed 90.73 percent of the total revenue during the period. It grew by 35.7 percent, amounting to N1.01 trillion in the nine-month period of 2023 from N745 billion in the nine-month period of 2022.
Selling and distribution expenses and administrative expenses grew by 38 percent and 44 percent respectively in the period under review. Selling and distribution expenses stood at N13.33 billion in 9M’2023 from N9.64 billion in 9M’2022, while administrative expenses for the period totalled N30.94 billion, up from N21.52 billion in the corresponding period of 2022.
Furthermore, the 133 percent spike seen in its finance costs was a primary driver for the profit and profit margin decline during the period. On the back of an increase in the cost of borrowings, finance costs spiked to N37.5 billion in the nine-month period of 2023 from N16.12 billion in the nine-month period of 2022.
Further analysis of the financial data shows that the total cash generated from operating activities after tax deductions and changes in working capital activities amounted to N36.1 billion in the nine-month period of 2023, indicating that the company is generating enough cash from its core business operations to cover its short term obligations.
The cash reported is also a marked increase from N-28.89 billion in the nine-month period of 2022, indicating that the firm did not generate adequate cash during the period.
Total cash from investing activities for the period under review was negative, totaling N54.69 billion, mainly due to the acquisition of property, plant, and equipment and the acquisition of the Honeywell Flour Mill s Plc subsidiary during the period.
With proceeds from borrowings received during the period, net cash from financing activities amounted to N36.76 billion in the nine-month period of 2023.
Consequently, Flour Mills Nigeria Plc, increased its liquidity for the period by 472.56 percent to N39.85 billion from N6.96 billion in the nine-month period of 2022.
The food and agro-allied company also reported earnings per share of N287 per share in the nine-month period of 2023 from N400 per share in the same period of 2022.
