Bumper season for flour millers as COVID-19 fuels growth

Nigerian flour millers are enjoying a bumper period in terms of revenue and profit, growing huge margins in three months to June 2020.

Their growth is driven by COVID-19 which has spurred patronage for food and flour products such as bread.

BusinessDay’s analysis of three major flour millers listed on the Nigerian Stock Exchange (NSE), which are Flour Mills of Nigeria, Honey Well and Northern Nigeria Flour Mills Plc, revealed that the firms recorded a total revenue of N181.9 billion between April and June as against the N153 billion realised in the corresponding period of 2019.

There have been huge sales of flour and food, driven by increased consumption and food donations to poor households by governments, NGOs and wealthy individuals.

Flour is used in the production of bread, which is a staple food among Nigerians. Flour millers also produce noodles and pasta, which are enjoyed by under-30 Nigerians making up over 70 percent of the population, analysts say.

“The lockdown period gave room for essential products which were very necessary at that time, especially the food and healthcare subsectors,” Ambrose Oruche, acting director general, Manufacturers Association of Nigeria (MAN), said.

Flour Mills of Nigeria (FMN), which wields the largest market share of 32 percent according to a KPMG Wheat Sector Report, realised a 15 percent increase in its revenue to N154 billion in April to June 2020, from N134 billion reported in the corresponding period of 2019.

The firm also made an increase of 56 percent in its gross profit to N25 billion in 2020, from N16 billion recorded in 2019. FMN also recorded an increase of 17 percent in its profit after tax, earning N4.97 billion in 2020, from N4.23 billion in the same period of 2019.

Similarly, Northern Nigeria Flour Mills recorded a significant revenue increase of 73 percent, earning N1.9 billion in 2020 from N1.1 billion in 2019. Its gross profit grew by 8 percent to N177 million in 2020, from N164 million in 2019. Also, the firm’s profit after tax grew by 580 percent to N68 million in 2020 from N10 million in 2019.

Honeywell also grew its revenue by 44 percent to N26 million in 2020, from the N18 billion reported in the same period of 2019. Its gross profit grew by 21 percent to N4.1 billion in the period under review, from the N3.4 billion realised in 2019. However, its profit after tax declined by 58 percent to N45 billion in 2020 from N108 billion recorded in 2019

According to the financials of FMN, the positive trend is expected to continue to the end of the year.

“Similar to the performance over the last few quarters, our business has been able to sustain the strong performance in spite of the increasingly difficult terrain and uncertainties,” the financials say.

FMN management remains optimistic that with continued efforts in sales and marketing activities geared towards boosting top-line while keeping costs under control, the company should be able to sustain the good performance for the remaining period.

Millers and analysts are hopeful for better results till the end of the year.

However, some industries like the brewery are not enjoying the same results, with bars, night clubs and event centres shut down on COVID-19 concerns.