Recently, Flour Mills of Nigeria Plc announced its unaudited half-year (H1) results for the year 2021/2022 showing consistent growth, with revenue increasing by 47percent and Profit After Tax (PAT) growing by 6percent compared to the same period last year.
In line with its strategy, the Group continued to sustain its growth trajectory with impressive performance and robust organic growth across all business segments, supported by product innovations and continued momentum in retail sales. The cost-saving programmes continues to yield results and financing cost reduces further.
The Nigeria’s leading integrated food and Agro-allied Group owns the iconic food brand, ‘Golden Penny.
The H1 scorecards
The Group’s revenue was N522.8 billion, compared to N355.1 billion in H1 2020/21 (47percent – year-on-year (YoY) growth). Performance was consistent across all key business segments in the group with Agro-allied and support segments in particular showing impressive growth by as much as 35percent.
The Group’s Profit Before Tax (PBT) was N15.5 billion, compared to N14.6 billion in H1 2020/21 (6percent – YoY growth). This performance was underpinned by continued strong operating performance in the food segment; continuous improvement in Agro-allied and support segments with a profit improvement of +25percent versus LY in Q2.
The Group’s Profit After Tax (PAT) was N10.5 billion, compared to N9.9 billion in H1 2020/21 (6percent – YoY growth). The Group’s solid operational performance was stimulated by strong organic growth, supported by product innovation, and continued momentum in retail sales.
The Group’s food businesses recorded volume growth across flour, ball food, pasta, and noodle categories in line with projections. Also, in furtherance to its growth strategies, the food division has commenced an expansion plan to further deepen market penetration in Northern markets through enhanced value creation and development of new point of sale outlets.
In the Agro-allied division, the Group has continued its goal of driving local content inclusion throughout the value chain. Along with gains from existing outgrower programmes and other activities aimed at strengthening its local supply chain, the Group remains dedicated to responsible and sustainable raw material sourcing.
The Group’s cost-cutting initiatives continue to bear fruit as evidenced by the decline in finance costs. Over the years, deliberate actions had been taken to minimize financial leverage through debt restructuring while maintaining an appropriate debt composition, including the reduction of foreign payables during the review period, to further manage foreign currency risk.
CEO speaks
While commenting on the result, Omoboyede Olusanya, the Group Managing Director, said: “I am very pleased with our half-year results. Despite prevailing economic and attendant business challenges, our Group has continued to show its resilience by achieving significant progress across operations.
“In keeping with our goal to continue creating value for our valued stakeholders, we will maintain a laser-like focus on achieving operational efficiency and accelerating our objectives for cost optimization across our operations.”
Taking a cue from the impressive outing in H1, 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 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 of Nigeria Plc 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. This is in addition to its commitment to continue to invest in production capacity and increasing aggregation/sourcing; as well as increase operational efficiency with accelerated plans for cost optimizations across the Group to ensure competitive product offerings and profitability in the new operating environment.
Read also: Flour Mills delivers consistent growth across top-to-bottom line figures in H1
Sugar segment
The Sugar segment was impacted by the current challenging trading environment and posted a loss of N1.5billion in Q2. The Group foresees the environment to stabilize and is very positive on the long-term feasibility of the Sugar value chain.
Golden Sugar Company continues to advance in exploring opportunities in brown sugar packaging, which will be accelerated during the year following the larger volumes coming from the Sunti sugar plantation. Flour Mills investment-grade credit ratings were upgraded from two agencies to “A” and “A-” with Flour Mills of Nigeria now being A-rated by all agencies.
Agro-allied segment
This segment saw significant improvement in PBT over 5 years – from N2.5billion loss in H1’18 to N7.5billion profit in H1’22. It recorded solid revenue growth in the Oil & Fats value chain (18percent y-o-y) driven by local demand and export sales with progress in its toll milling activities in the North to increase market penetration. It also saw continuous volume growth in the Fertilizer business at 14 percent YoY with the introduction of smaller SKUs to address cash outlay considerations for medium and small-sized farmers. Also, the animal feeds value chain continues to advance operations to meet demand with the new factory in Kano State – capacity at 5,000MT/month. The Starch business progressed in its backward integration plans for cassava production to improve efficiency in sourcing for raw materials and increase availability of raw materials.
Transformation and Innovation
Flour Mills of Nigeria Plc recorded capacity expansion in the B2C segment. It introduced smaller pack sizes for Golden Penny noodles, margarine and spread soya oil; deployed 70 new trucks in the transport division to improve productivity; as well as set up 6 retail distribution centres to enhance availability, especially of smaller pack sizes, and increase reach.
Key priorities
One of the group’s key priorities is the expansion of its B2C capacity as well as continuous product availability in the market via regional distribution centres. It hopes to engage in sustainable and responsible sourcing of raw materials to ensure high product quality. This is coupled with sustaining product commitment despite material costs escalation and improving operational efficiencies and cost management initiatives.
Flour Mills has strong operating cash flows despite deliberate movements in foreign trade payables. Cash from operations of N28.2 billion is driven by increased sales and improved operational efficiencies across the value chains amid continued reduction of overseas payables during the review period to mitigate foreign currency risk.
Local Content Initiatives
The group sustained progress in the development of local content and inclusion in its products. There was increased focus on initiatives to drive the inclusion of local content in the food value chain, as well as continued development of local substitutes (such as cassava, sorghum, starch) for inclusion into wheat flour and other wheat-based products. It modified existing core product range via substitution of imports wtih local ingredients in core product offerings. This is in addition to continuous innovation and new product launches in the pipeline.
Join BusinessDay whatsapp Channel, to stay up to date
Open In Whatsapp
