Flour of Nigeria Plc said net income surged 184.25 percent on the back of accelerated growth in the Agro Allied Business and Food segments even amid prevailing economic headwinds and the difficult operating terrain in Apapa.
For the year ended March 31st 2020, Flour Mills’ net income moved to N11.37 billion from N4 billion the previous year.
Revenue was up 8.79 percent to N573.77 billion for the year ended March 2020, as against N527.40 billion the previous year.
Also, the largest miller by market value in Africa’s largest economy saw investment income (Interest income from short term investments and bank) spike by 211.09 percent to N2.39 billion, which added impetus to the bottom line (profit).
A breakdown of top line figures shows Food was up (+6.77); Agro products, (+19.70), and Sugar, (+18.05 percent), as the miller’s focused to improve customer experience saw the introduction of a range of product.
The border closure by Federal Government in order to curb smuggling of products into the country boosted the Food and Agro Business segment because consumers are now forced to consume spaghetti (pasta) and locally produced palm oil and sugar.
Operating profit followed the same growth trajectory as it was up 8.69 percent to N35.07 billion as against N32.29 billion the previous year.
The company’s revenues are growing faster than costs as gross profit margin increased to 11.46 percent in March 2020 from 10.11 percent the previous year.
“We will continue to focus on increasing operating efficiency and within the group as we continue to implement our accelerated cost optimization plans across all businesses to ensure profitability in the new operating environment,” said Paul Gbededo, Group Managing Director, Flour Mills of Nigeria.
Flour Mills has invested more than N150 billion over the past ten years to execute its core business strategy to aid the agricultural sector. These investments have been made primarily in Agriculture and Infrastructure.
The company said the volatile commodity prices arising from unpredictable changes in global supply and demand, exchange rate fluctuations and punitive tariffs and import barriers, has made its reliance on imported raw materials risky, expensive and unsustainable.
The need to create value further back in the supply chain and reduce dependence on imported raw material has been identified as a strategic imperative for the Group in the years ahead, according to the company.
Flour Mills has enough cash flow to cover interest expenses and there are no threats to going concerns.
The Times interest coverage ratio was 2.0 times earnings, which is higher than the 1.50 times international bench mark.
Finance cost dipped by 12.84 percent percent to N19.97 billion in the period under review as against N22.89 billion the previous year.
The company had raised capital via rights issue to deleverage the balance sheet, and the strategy has paid off because reductions in finance cost and increased revenue have added strength to profitability.