• Tuesday, March 19, 2024
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Flour Mills to refinance existing short-term debt with N20bn bonds

Flour Mills of Nigeria

Flour Mills of Nigeria (FMN), the nation’s leading integrated food business and agro-allied group, has announced it will issue up to N20 billion medium term bonds to refinance existing short-term debt and increase further the efficiency of its balance sheet, having in focus maximisation of wealth for its shareholders. The notice, which was released by the company secretary to the authorities of the Nigerian Stock Exchange (NSE), indicated that the process of obtaining the requisite approvals from the Securities and Exchange Commission (SEC) for the issuance of the bond had begun.

“The bonds, which are expected to be senior unsecured fixed rate bonds with tenors of 3 and 5 years respectively, are part of its previously-approved N70 billion bond issue programme.

“The management of FMN has disclosed that the proceeds from the bonds will be used to refinance existing short-term debt and increase further the efficiency of its balance sheet, with the ultimate objective of maximising the wealth of its shareholders”, Umolu Joseph, company secretary and director of legal services said.

As at the end of the 2019 financial year ended March 31, 2019, Flour Mills of Nigeria recorded N265.85 billion as total liabilities, representing 3.15 percent increase over N257.73 billion worth of total liabilities as at March 31, 2018. Equity within the same period remained flat at N150.97 billion compared to N150.62 billion in March 2018. It thus implies that within the period gearing ratio declines from 37 percent for equity to 63 percent for debt in March 2018 to 36 percent for equity to 64 percent for debt in March 2019.

The gearing ratio might further increase in favour of debt when the current year ends by March 2020. This is because, in addition to the current bonds of N20 billion, the agro-allied giant had raised commercial papers worth N1.7 billion (series 6) in April 2019.

“Flour Mills of Nigeria Plc, Nigeria’s leading food and agro-allied group, announces the issuance of the sum of N1.7 billion (series 6), under its N100 billion Commercial Paper Programme which is registered with the FMDQ OTC Plc. (FMDQ) and completed on February 14, 2019.

“All issuances totalling N20.34 billion under the programme are quoted on the FMDQ Exchange. The management of FMN disclosed that the commercial paper programme will help the company to focus on its strategic objective of sustaining its market leadership position within the foods and agro-allied space”, Flour Mills announced in April 2019.

In spite of the rising gearing ratio, its finance costs have remained moderate. In March 2019, Flour Mills paid N22.89 billion as finance costs compared with N32.69 billion the company paid in March 2018.

Last week Friday, investors traded 913,650 units of flour mills worth N21.40 million to close at N23.50, representing a year to date gain of 19.3 percent.

 

TELIAT SULE