spot_img
spot_img
23.2 C
Lagos
Thursday, August 18, 2022

Flour Mills Utilizes Assets to Generate Higher Sales

Must read

Flour Mills of Nigeria Plc is using its property, plant, and equipment to magnify revenue even amid a difficult business environment and Covid-19 crisis.

The company’s average fixed asset turnover (FAT) ratio increased to 2.61 in December 2020 from 1.95 the previous year, according to MoneyCentral calculations.

A FAT ratio of 2.61 means that for every N1 invested in fixed asset, a return of almost N3 is earned.

Fixed Asset Turnover (FAT) is an efficiency ratio that indicates how well or efficiently a business uses fixed assets to generate sales.

This ratio divides net sales by net fixed assets, calculated over an annual period. The net fixed assets include the amount of property, plant, and equipment, less the accumulated depreciation. Generally, a higher fixed asset ratio implies more effective utilization of investments in fixed assets to generate revenue.

Flour Mills is also utilizing the resources of its owners in generating higher profit as return on average equity (ROAE) increased to 12.50 percent in December 2020 from 6.90 percent the previous year.

The leading integrated food business and Agro-Allied group (owners of Golden Penny) attributes the impressive performance across all key segments to investment in backward integration that is underpinning returns.

Revenue rose by 31.14 percent to N555.34 billion as at December 2020, the second fastest bottom-line expansion among peer rivals

The company remains focused on increasing operating efficiency with accelerated plans for cost optimaisation across all business segments in the Group to ensure competitive business offerings and profitability in the new operating environment.

Over the last three years, Flour Mills has engaged in a number of restructuring efforts aimed at streamlining the operations of the group for delivery of optimal returns. Most of these reforms were within its Agro-Allied segment where Premier Feeds, Premium Edible Oil, Golden Fertilizer and the Farms were classified within the segment, while Sugar was rotated out into a stand-alone segment.

These efforts have helped drive an improvement in efficiency within the group operations, as well as positioning the group to have benefitted from Nigeria’s border closure policy, which lasted between August 2019 and December 2020.

Gross profit margin increased to 13.50 percent in the period under review as against 11.30 percent the previous year.

Total operating expenses was up 4.20 percent, which is lower than the March inflation figure of 18.17 percent.

As a result of stronger cash generation, brought on by the impressive growth in sales, Flour Mills’ net debt has consistently declined over the last three years.

Analysts say the company benefited from the border closure as competitors were not able to import cheap products into the country.

Also, the consumer goods giant has an excellent marketing and distribution strategy that ensures its products reach the retailers.

Earlier this year, Flour mills successfully raised a N30 billion bond, out of the registered N70bn bond programme. The issuance was well subscribed, with an oversubscription of 405 percent.

The reopening of the economy after a long period of lockdown and vaccine rollout are expected are a boon for the company and its peers.

However, lack of structural induced policies by the government and decrepit infrastructure have continued to bedevil the consumer goods industry.

Consumer wallets are squeezed, while a possible hike in utility bills and rising inflation are pushing more people into the poverty dungeon.

Nigeria’s annual inflation climbed to a more than four-year high in March, rising 82 basis points from a month earlier to 18.17 percent, according to a recent data from the National Bureau of Statistics (NBS).

- Advertisement -spot_img

More articles

LEAVE A REPLY

Please enter your comment!
Please enter your name here

This site uses Akismet to reduce spam. Learn how your comment data is processed.

- Advertisement -spot_img

Latest article