Northern Nigeria Flour Mills (NNFM) Plc has recorded its first profit in six years overcoming the headwinds caused by weak consumer spending, foreign exchange scarcity, and currency devaluation as it paid its shareholders dividend.
The flour miller benefited from the border closure imposed by government to curb smuggling of products in and out of the country as consumers were forced to patronize key products that the company manufactures.
The largest Miller in Northern Nigeria surmounted the currency crisis by substituting for imports and exporting more, as it has been investing in sourcing its materials- cassava, maize, rice, sugar, and palm oil- locally.
The cut in import bill mainly helped bolster profit margins and curtail costs in an environment beset by decrepit infrastructure such as bad roads that leads to the ports and epileptic power supply from the nations gird that ensnares manufacturers in huge overhead costs
Its audited financial statement for the year ended March 2020 showed it reverted to a profit of N64.64 million, which compares with losses of N31.39 million, N60.98 million, N18.04 million, N197.24 million, and N199.95 million in the years 2019, 2018,2017, 2016, and 2015 respectively.
Similarly, revenues surged by 113.52 percent to N8.84 billion in 2020 from N4.41 billion the previous year, and the company has been maintaining consistent top line growth since 2016.
NNFM’s revenue growth are faster than cost as gross profit increased by 33.76 percent to N876.05 million in the period under review, that compares to the loss it recorded of N100.71 million in 2016.
The company’s operating income excluding depreciation and interest expense increased by 6.50 percent to N562.13 million in the period under review from 2019’s N528.17 million.
Consumer goods firms in Africa’s largest economy faltered in 2016 as the sharp oil drop of mid-2014 stoked a severe dollar scarcity that tipped the country into its first recession in 25 years.
Manufacturers were unable to source foreign currency at the official rate, forcing them to buy at an exorbitant black market rate, which made it difficult to import raw materials and equipment to meet production.
In 2017, the introduction of a new foreign exchange regime by the central bank that eased the flow of dollars in the foreign exchange market combined with an aggressive hike in price of key products ameliorated the pains of consumer goods firms.
But the country economic fundamentals have not improved since 2018, as inflationary pressure and unemployment rates crimps consumer wallets, a double whammy for companies that are unable to pass on cost on to consumer in form of higher price.
The coronavirus pandemic which snaked out of Wuhan City of China has ravaged economic across Europe, United States, Asia, and Africa there is bleak outlook for Nigeria.
The Covid-19 crises disrupted the demand and supply side of the market, as factories operated below optimal level while consumers were not able to shop due to lockdown imposed by government to curb the virus.
Economic growth in the first quarter of 2020 (Q1-2020) slowed to 1.87 percent and the figure for the next quarter (2020) is set to come in negative, despite the series of stimulus packages announced by the authorities aimed at easing the impact of the pandemic on businesses and households.
Despite the bleak outlook and gloomy prognosis due to the devastating impact of the virus on the economy, NNFM is expected to thrive amid headwinds largely because its major product portfolios (Food, Sugar and Agro-Allied) are concentrated on essential items.
NNFM has 3 manufacturing units with a combined capacity of 1,200 metric tons per day, making it a major player in the Kano market.
The NNFM product range includes Golden Penny Flour, Golden Penny Semovita, Wheat Offals and a range of maize products (Masavita, Masa Flour and Corn Offals).