Kayode Tokede
Flour Mills of Nigeria Plc (FMN) reported all-round impressive performance in its audited financial statement for the period ended March 31, 2022 to maintain its position as the leading integrated food business and agro-allied group and one of the most fundamental stocks listed on the Nigeria Exchange Limited (NGX).
The company demonstrated solid performance across Food, Agro-Allied and Support Segments to deliver revenue growth of about 51per cent to N1.1 6trillion in 2022 from N772 billion reported in 2021.
The growth in revenue can be attributable to strong volume growth and favourable mix. Key segments that contributed to significant increase in revenue are: Food, Agro-allied, Sugar and ‘Support’ segments.
In the year under review, FMN reported 57 per cent increase in its food segment to N749 billion as against N478 billion reported in 2021, while its Agro-allied closed 2022 financial year at N213 billion, an increase of 53 per cent from N139 billion reported in 2021.
Further breakdown of revenue revealed that its sugar segment rose by 25 per cent to N156 billion in 2022 from N125 billion reported in 2021, while ‘support’ grew significantly by 56 per cent to N46 billion in 2022 from N29 billiion in 2021.
The food segment performance was driven by increased B2B volume contribution with most lines recording double digit growth and growth in core B2C categories: Noodles and Ball foods (Semo and Goldenvita).
Investment in product innovation
The company also invested in product innovation (amazing day cereal, goat meat pepper soup Noodle flavour) and driving volume in the economy/value pack segment.
For the agro-allied segment that contributed 53 per cent to revenue, key components that contributed to the growth are Oil and fats business that grew revenue by 58 per cent, while pretax profit margin expanded by 141 per cent y-o-y driven by improved export operations (revenue up 26per cent), implementation of Cost savings program and installation of a seed cleaning plant to reduce frequent machine breakdown in production.
Also, the agro-allied segment growth of FMN’s Animal feeds business recorded 49per cent growth, largely due to product innovation and investments in logistics infrastructure and fertilizer business expanded with a new blending plant in Kaduna state, contributing 89per cent and 21 per cent growth in revenue and volume respectively.
About 25 per cent revenue growth in the sugar value chain is driven by actions to support to dealers. Brown sugar continues to gain traction following sustained demand from the North and other industrial customers and the segment’s operating performance was largely impacted by the rise in raw material cost.
In addition, support segment revenue and profit growth in the support segment largely driven by: increased demand for locally produced packaging material, focus on high value products and increased focus on RTM for the company’s innovative products such as Zero Fly.
Amid inflationary pressure, among other factors, the company reported 59per cent increase in cost of sales (CoS) to N1.06trillion from N665billion reported in 2021 financial year.
Cost of raw and packing materials rose by 64 per cent to N957.97billion in 2022 from N583.62billion in 2021 to contribute 95.3 per cent to CoS in 2022 from 87.78 per cent in 2021.
The interplay between revenue and cost of sales led to the company’s gross profit marginally increase of one per to N108billion in 2022 from N107billion in 2021, to positioned gross margin at 9.3per cent in 2022 from 13.86per cent in 2021.
However, the significant increase in international food prices and input costs impact gross margin. Wheat and sugar costs increased by over 30per cent and 20per cent respectively in addition to higher energy and local distribution costs whilst sustaining progress on ESG agenda.
Operating expenses, however, grew by four per cent to N43billion in 2022 from N41billion reported in 2021, while finance costs moved to N41billion in 2022, an increase of 11per cent from N37billion reported in 2021.
Topline performance thrust profit, dividend
With the growth in revenue and effective management of cost, FMN reported N41billion profit before tax in 2022, an increase of 11 per cent from N37billion reported in 2021.
Tax expenses grew by 14 per cent to N13billion in 2022 from N11billion in 2021, to positioned profit for the year at N28billion, nine per cent increase from N26billion reported in 2021 financial year.
On the backdrop of improved profit, the management of FMN proposed a dividend of N2.15 per share, representing a 30per cent growth vs LY (compared to an 18per cent growth in 2021 and a 17per cent growth in 2020)
The total proposed dividend is N8.8billion in the year under review as against N6.8billionn declared in prior year.
Balance sheet on impressive position
The growth in profit & loss figures couldn’t have achieved impressive performance without a robust balance sheet to operate with. In 2022 financial year, FMN’s total assets rose by 22.44 per cent to N667.01 billion from N544.73 billion in 2021.
FMN’s total non-current assets rose by 6.7 per cent to N254.9 billion in 2022 as against N238.7billion in 2021while Total current assets rose by 34.7 per cent to N412,12 billion in 2022 from N306 billion in 2021. The group’s total equity gained 12.19 per cent to N195.9 billion in 2022 from N174.6 billion in 2021.
Furthermore, the group’s total liabilities rose by 27.3 per cent to N471.12 billion in 2022 from
However, total current liabilities rose by 40 per cent to N293.6 billion in 2022 from N209.7 billion in 2021, while Total non-current liabilities gained 10.66 per cent to N177.52 billion in 2022 from N160.4 billion in 2021.
Acquisition of Honeywell Flour Mills
FMN had obtained approval and has acquired Honeywell Flour Mills Plc. The company through its affiliates acquired 71.69per cent equity stake in Honeywell Flour Mills Plc (HFMP) to reinforce its position as the leader in flour, semolina and pasta markets.
In addition, FMN through its affiliates also acquired 5.06 per cent equity stake of FBN Holding’s in HFMP. Presently, FMN is the majority shareholder with 76.75per cent equity stake with operational and managerial control.
The Transaction was valued at a total estimated enterprise value of N80billion and the transaction was concluded at final equity price per share of N4.20.
With the acquisition, FMN aimed to extend footprint, enlarged customer base, solid market share and better channel penetration, strong combination of market-leading and diverse product offerings to the Nigerian population and strategically positioned for the opportunities stemming from the African Continental Free Trade Area (AfCFTA).
FMN’s outlook
FMN noted that it is dedicated to achieving strategic growth opportunities, both organic and inorganic, within the sector and remains committed to executing its overall long-term strategy to maintain growth and sustained profitability by increasing local content through product innovation across the 5 core value chains: Grains, Oils and Fats, Proteins, Sweeteners and Starch
The Group also expressed that commodity prices and input costs expected to increase further as the war between Russia and Ukraine continue to drive up production costs and performance of Sweeteners foreseen to strengthen over the next two quarters, with the value chain being very attractive in the long run.
The integrated food business and agro-allied group said it continue to fill the needs of the consumers with route to market and new product initiatives across the group, investment in production capacity and increasing aggregation/sourcing and increase operational efficiency with accelerated plans for cost optimizations across the Group to ensure competitive product offerings and profitability in the new operating environment.
Long-term Plan Implementation
The Group Managing Director, FMN, Omoboyede Olusanya, had said:“We remain committed to implementing our long-term plan with further investments in local content via product innovation across our five major value chains.
“Our substantial underlying earnings demonstrate our commitment to achieving sustainability as we drive to achieve food security in the country, given the challenging operating environment over the years.
“With the acquisition of HFMF and the attendant differentiated offers, our portfolio continues to evolve, strategically positioning the Group for opportunities from the AfCFTA.
“With the appointment of our third female board member and the promotion of gender diversity throughout our business segments, our sustainability agenda made more strides in line with our long-standing commitment to women’s empowerment.
“In addition, we developed a local content, food security, and nutrition board committee to improve the well-being of our consumers, assist in regenerating and strengthening the farming communities in our supply chains, and promote local economic development.
“In line with our strategy, we will continue to increase operational efficiency with accelerated plans for cost optimizations across the Group. This will ensure that we are on course to continue to create value for our shareholders in the long run.”
