Higher cost of raw and packaging materials incurred by Honeywell Flour Mills Plc in the full-year ended March 2019 has plunged the net income of the flour miller to its lowest level since 2016, the company’s 2019 audited financial results have shown.
The company’s profit for the year slumped by 98 percent to N68.37 million as against an after-tax profit of N4.43 billion garnered a year earlier, no thanks to a 13.5 percent increase in its cost of production.
Despite the cost of goods sold rising to N62.9 billion in 2019 from N55.4 billion in the previous year, the company’s sales, which were all made in Nigeria, only witnessed a 4 percent growth to N74.4 billion from N71.5 billion, according to the results filed at the Nigerian Stock Exchange (NSE).
This further attests to the tough operating environment impacting negatively on the profitability of Nigerian consumer goods firms, particularly with the Apapa gridlock and epileptic power supply.
Checks by BusinessDay revealed that the company spent more than triple of its profit in the year on power supply and maintenance. The amount spent on plant maintenance and power cost surged 10.6 percent in 2019 to N2.62 billion compared with N2.37 billion expended in 2018.
Besides the power challenges which weighed on the firm’s income, the decline in its revenue was largely driven by lower demand for noodles in the year.
The company’s business operating segment in Ikeja primarily manufactures noodles.
While consumers requested for less of the product, sales of flour, semo, wheat meal, brown flour and composite flour produced by Honeywell’s Apapa factory continued to boom.
The company sold N12.27 billion worth of noodles in full-year 2019 compared with N12.34 billion realised from the sale of the goods in the previous year.
For the Apapa factory, revenue rose to N62.14 billion from N59.13 billion in the preceding year.
On the back of the sharp drop in the company profit after tax, the directors of the firm did not “recommend the declaration of any dividend in order to conserve fund,” Honeywell said in the reports of directors contained in the financial results.
Following the release of results, the flour miller notified the investing public of its 10th Annual General Meeting slated to hold on Thursday, September 26, 2019 in Lagos.
The firm said it would seek re-election of retiring directors, the election of members of the audit committee, and authorization of directors to appoint new independent auditors for the replacement of the retiring auditors Messrs BBC Professional at the meeting.
Shares of Honeywell Flour Mills closed unchanged at N1.01 per share for the first half of the year, the stock lowest price since the start of this year.
Honeywell Flour Mills plc was initially registered as Gateway Honeywell Flour Mills Limited on June 21, 1983. But in June 1995, the company underwent a change in its ownership structure which led to a change of the name to Honeywell Flour Mills Limited. The firm was converted to a public liability company in 2008, while its shares were listed on the NSE in 2009.
Oluwasegun Olakoyenikan
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