When the Flour Mills of Nigeria (FMN) Plc made public its financial results for the year ended March 31 2020, it finished the year strong with a record 184 percent growth in Profit-after-tax. As captured in an earlier analysis by BusinessDay, the last time the Group recorded success of that magnitude was in 2016 when it reported a growth in profit after tax of 70 percent. The group recorded remarkable growth in all three key segments of Food, Agro- Allied and Sugar, FMN.
Leading the company to new heights of success in what has been a turbulent year for the Nigerian economy is Paul Gbededo, who has been CEO since April 2013. Gbededo’s 38-year career with FMN Group started at Nigerian Bag Manufacturing Company Plc ( 1982 – 1998). There, he acquired extensive experience serving in various managerial positions as Process Control Manager, Production Manager, General Manager Production and became the first Nigerian Production Director in 1993.
A Fellow of the Polymer Institute of Nigeria and former Managing Director of FMN’S Agro-allied Business, Gbededo was appointed the Group Managing Director /Chief Executive Officer of Flour Mills with effect from 1st April, 2013.
According to his profile on the company’s website, he was educated at the Polytechnic of North London, UK, where he obtained Graduateship of Plastic and Rubber Institute and Associateship of National College of Rubber Technology in 1980, and holds MSC. Degree in Polymer Technology (1981) of Loughborough University of Technology, UK.
An alumnus of the Lagos Business School’s Advanced Management Programme 3, he attended Pasta Machinery Use, Maintenance and Operation at FAVA, Italy in 2005.
Gbededo who is credited for his pioneering role in fertilizer, pasta and rice production, in 1998, became General Manager/ Director in charge of fertilizer operations, pioneering development of the product, “Golden Fertilizer”. He also served as a pioneer General Manager/director for Golden Pasta Company Limited, a former subsidiary (now a division) of Flour Mills.
In July 2012, Paul was elevated to the position of Managing Director, Agro-allied business with responsibility to implement FMN Group’s backward integration policies, programmes and initiatives. Less than two years later, he was appointed the company’s GMD/CEO.
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Bright prospects in a lull economy
In the year when many Nigerian companies nurse fears of revenue declines amid the country’s slow economic growth, Flour Mills of Nigeria reported a revenue increase of 9 percent year-on-year from N527.4 billion the previous year to N574 billion in 2019/2020.
A Businessday analysis had stated that with a broad basket of food products and robust panNigerian production, distribution, and supply chain network, FMN in 2020 recorded a N7.4 billion or 184 percent increase in Profit After Tax (PAT), from N4 billion in 2018/2019 to N11.4 billion in 2019/2020. This was almost triple the 72 percent growth recorded for its Profit Before Tax.
Analysis of FMN’S 2020 financials also revealed that its Agro-allied division was a major catalyst in the growth record reported in the review year as the business segment of the company reached profitability. This was largely due to the consistent and focused investments that have been made in its locally sourced segment over the last few years..
The Agro-allied segment of FMN’S business contributed the most revenue in the year under review. Revenue from the business arm increased by 20 percent , from N88.1 billion the previous year, revenue from Agro-allied rose to N105.5 billion in 2020.
The increase in revenue contribution from Agro-allied division was attributable to the company’s investment strategy aimed at ensuring profitability and improving local content in the group’s product portfolio.
Flour Mills in recent years invested about N100 billion in its Agro-allied business. In 2018, President Muhammadu Buhari commissioned its N50 billion Sunti Golden Sugar Estate in Niger state. The facility has been described as one of only two sugar mills in the country capable of producing crystallised sugar from locally grown sugar cane. This was an addition to the already invested N50 billion in a state-of-the-art sugar refinery in Apapa capable of refining up to 2000mt of sugar per day.
When the National Sugar Development Council (NSDC) had its mid-term review in 2017, Sunti Golden Sugar scored 58 percent in the targets set in the backward in
tegration plan, including number of projects, new sugar factories, land developed, land under cane, out-grower farms, sugar produced and job creation. It came ahead of Dangote, which scored 45.8 percent and BUA, which scored 17 percent.
Under Gbededo’s leadership, FMN’S recent giant strides have not been limited to Sugar. There have been efforts to become a major player in the palm oil value chain as well where like many other commodities, Nigeria has a significant deficit.
Flour Mills of Nigeria (FMN) according to information gleaned from a factsheet, is stepping up its position in the oil palm space, with an ambitious plan for a tenfold increase of its current production within about seven years. Crude Palm Oil (CPO) production by the company, which is currently 2,700 tons, is projected to increase to 22,000 tons by 2027, an almost tenfold increase within seven years (2020 – 2027) once the mill is commissioned and projected to grow to 52,000 tons by 2030.
Located in Edo state, the palm oil investment by FMN currently sits on 11,600 hectares spread across three locations; Iguobanor and Iquiye (Agri Palm 1) and New Land (Agri Palm 2), which are 25 kilometers apart.
In 2014, the company unveiled what it describes as one of the biggest, automated edible oil refineries and the first margarine plant in the country. The operation of the refinery is supported with palm oil from a 4,500-hectare oil palm plantation in Edo State together with soybean sourced by its aggregation teams across the country.
A further analysis of the 2019/2020 financials of FMN revealed the Agro-allied division turned profitable following a repositioning and prior year funding of the key-value chains of Oils and Fats, Proteins and Starch businesses.
Revenue was driven by volume growth predominantly in Oils and Fats (Premium Edible Oils), Proteins (Premier Feed) and Golden Fertilizer. Strong profit growth in Oils and Fats and Proteins with Gross Profits more than doubled in both segments on an annual basis (with some IFRS9 adjustments in Q4 last year).
With an 18 percent revenue growth in the year ended March 31 2020, the Sugar segment of FMN group was closely behind the revenue contribution from Agro-allied business. From N82.7 billion in the year before, the Sugar arm of the Group increased to N97.6 billion.
The revenue growth recorded from the Sugar business was driven by an increase in volumes. The improved operational efficiency in Sunti Golden Sugar Estates by commencing mechanical harvesting, strengthening the cane haulage facilities and installing a vacuum pump condenser resulted in 15 percent increase in plant output.
The Food segment of FMN business also recorded an increase in revenue contribution during the year ended March 31 2019/2020. The Food segment saw a 7 percent revenue growth from N335.6 billion the previous year to N358.4 billion.
Accelerated business-to-consumer (B2C) growth due to new product launches, expansion of production capacity and regional SKUS were the major driver of the revenue increase. The company had also recently launched new products such as Auntie B pasta and semolina to ensure right regional offerings and affordability, as part of strengthening its market share in those segments.
The FMN Group’s mantra, “Feeding the Nation, every day,” is according to the company, at the heart of its strategic decisions on what to produce, how and where factories are set up, the level of care that is put into products, and how they interact with host communities and the wider environment.
As Gbededo told Businessday in an 2019 interview, “Our goal to be involved in all stages of the food value chain has over the years continued to inspire our investments in the development of critical infrastructure that is required to support our target value chains”. The company’s giant strides in recent years show it has been living true to its mantra and does not appear to be relenting.
Giving value to shareholders
A Businessday analysis had shown that following the good performance reported for the year ended March 31 2019/2020, the Board of FMN Group recommended a dividend of N1.40 per ordinary share of 50 kobo each. The proposed dividend is 17 percent increase when compared to 2019 and 40 percent when compared to 2018.
According to the Company, the proposed dividend was based on confidence in the business. The total proposed dividend in 2020, although still subject to AGM ratification is N5.7billion an increase of N800 million from N4.9billion in 2019.
Feeding the Nation, every day, is according to the company, at the heart of its strategic decisions on what to produce, how and where factories are set up, the level of care that is put into products, and how they interact with host communities and the wider environment
