Flour Mills of Nigeria, the biggest flour miller by market value grew its Q1 2019/20 profit by the most since 2016 helped by a pick-up in sales, lower tax expense and a significant cut in borrowing cost in the period.
The miller saw profit jack up by 16.11 percent to N4.24 billion compared to N3.65 billion in the same period last year.
The latest performance halts a decline in the company’s Q1 bottom-line which started in 2016.
Shares of Flour Mills gained 6.07 percent to close at N14.85 per share Thursday.
Flour Mills which is bouncing back from a 19.48 decline in its first quarter profit last year is reaping the benefits of deleveraging its books by 36 percent year-on-year in the review period while sales turned the corner to a 5-year high.
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The company had said it would continue active balance sheet management. “The objective is to achieve additional reduction in finance costs in the current year,” the miller said in an investor presentation on its website.
As at the end of the AprilJune period finance cost had been cut down to N4.55 billion compared to N6.20 billion last year. This follows a 30 percent cut in borrowing cost to N22.9 billion in the full year to March 2019 from N32.7 billion in the corresponding period of 2018.
Revenue growth grew 1.2 percent as the miller reversed a 10.7 percent decline in sales last year to post N134.75 billion in its recently concluded quarter The maker of Golden Penny range of food products and Golden Fertilizers noted a drag in its food segment which slowed some 3 percent.
Even though Support Services slowed, Agro-Allied and Sugar segments improved. A faster increase in cost of sales than revenue rose meant Flour Mills pared its Gross Profit which shrunk for the first time in more than three years.
Cost of Sales saw an uptick of about 2 percent and top-line fell to N16.47 billion. The Miller was able to retain N12.23 from every N100 sales after adjusting for direct cost in Q1. This is marginally less than N12.98 per N100 last year.
The combined effect of a weaker top-line and increase in Selling, General and Administrative expenses trimmed operating profit by some 12 percent to N9.9 billion.
