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Honeywell Flour’s Net Income Surges 1722.2% On Lower Commodity Price, Border Closure

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Honeywell Flour Nigeria Plc’s profit has hit more than a decade high, an unprecedented stellar performance that can be largely attributed to lower commodity price and border closure by government that helped bolster margins.

The consumer goods giant operates in an environment reeling from weak consumer purchasing power, rising inflation, decrepit infrastructure, huge energy cost, hefty levies, and high interest rates.

For the first three months through March 2020, the company’s net income surged by 1722.21 percent to N650.49 million from N35.70 million the previous year.

There is cost efficiency as revenue grew faster than costs, and the company turned each Naira invested in sales into higher profit.

Revenue was up 8.13 percent to N80.45 billion in March 2020 as against N74.40 billion the previous year.

A breakdown of the top line figures shows revenue for the Apapa segment, which makes up 80.12 percent of total Group figure, increased by 4.24 percent to N64.78 billion as at March 2020, while Ikeja dipped by 48.12 percent to N6.37 billion.

While the Sagamu segment did not generate revenue last year, it realized N9.29 billion at the top line.

Analysts say the lower wheat prices in the last 18 months brought on by trade war between the United States and China has continued to support production cost.

They added that the company got a boost from the border closure that forced consumer to shift to spaghetti because rice became very expensive and scarce.

The lockdown policy adopted by government to curb the spread of coronavirus has damped demand for wheat as factories were not able to produce to full capacity. This has further sent commodity prices crashing.

Honeywell Flour is has spent less on input cost to produce each unit of sales as cost of sales ratio fell to 82.75 percent in March 2020 from 84.51 percent the previous year.

Cost of sales increased by 5.86 percent as at March 2020, lower than 12 percent inflation figure.

The company is profitable in its core business as it uses its materials and labor to produce and sell products profitably.

Gross profit margin increased to 17.22 percent in March 2020 from 15.45 percent as at March 2019. Gross profit was up 20.52 percent to N13.86 billion in the period under review.

Operating profit margin increased to 6.82 percent in the period under review from 5.09 percent the previous year while operating profit was up 44.89 percent to N5.49 billion in March 2020 from N3.79 billion the previous year.

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