FMN reaps the benefits of innovation


Flour Mills of Nigeria Plc has combined product innovation, cost optimization and backward integration to achieve better results in the fiscal year ended March 31, 2021, despite headwinds in the economy, writes Goddy Egene

Operational activity in the Nigerian environment has been very difficult in 2020 following the spread of the COVID-19 pandemic in Nigeria. Besides the usual headwinds such as poor infrastructure, high cost of raw materials and rising inflation, many businesses have had to deal with the challenges posed by the COVID-19 pandemic.

The economy has been in a lockdown for months, a development that has affected business operations.

Therefore, stakeholders feared that, given the impact of the pandemic, companies would perform poorly and reward shareholders with lower dividends. However, some companies have shown resilience based on their interim results.

Flour Mills of Nigeria Plc (FMN), whose fiscal year runs from April 2020 to March 2021, is among the companies that have weathered the headwinds to report better financial results and reward shareholders with a high dividend.

Relying on product innovation, the agro-allied turnaround strategy, cost optimization and renewed emphasis on upstream integration programs, FMN recorded growth in both revenue and turnover.

The audited results for the fiscal year ended March 31, 2021 showed an innovation-driven revenue performance, underlined by accelerated growth over four quarters compared to the same period of the previous year. The performance also indicated that the group achieved impressive revenue growth for the year, helped by gains from its agro-allied turnaround strategy.

A breakdown of the results showed that FMN posted a turnover of N771.6 billion for the year, a growth of 34.5% from the N573.77 billion recorded the previous year. The net financial cost fell from N17.5 billion to N15 billion, thanks to a better cost and financial management strategy. Profit before tax rose 112 percent to N37.19 billion from N17.50 billion, while profit after tax (PAT) grew 126% faster to print at N25.72 billion from N11 , 38 billion the previous year.

The company’s efficiency was reflected in the profit margin before tax (PBT), which improved from 3.0% to 4.8%, while profit after tax (PAT) increased from 2 % to 3.3%.

Based on the improved results, the board proposed a dividend of 165 kobo per share compared to 140 kobo per share last year.

Commenting on the results, the general manager of the group, Mr. Omoboyede Olusanya said: -year of history.

“I want to thank all of our employees for their patience and hard work as we have consistently adapted to the challenges of the year and made significant investments in our goal of feeding the nation every day.”

FMN has successfully issued N30 billion of corporate notes with maturities of 5 and 7 years at 5.50 percent and 6.25 percent, respectively, to strategically replace expensive short-term facilities.

Promoting upstream integration programs also enabled the company to expand value delivery across all value chains, including strategic partnerships with smallholder farmers, which generated an average income gain of 34 % in all sectors of activity.

In addition, the company said its food business has also experienced exponential organic growth, driven by constant product innovation and transformation in new markets, as well as operational efficiency through go-to-market investments. in the digitization and rapid expansion of the business to consumer (B2C) sectors.

Company management is committed to maintaining a constant focus on strong discipline in operational and financial efficiency by increasing local content in group-wide supply chains and to upholding its commitment to favoring upstream integration programs in all value chains.

According to the company, the year under review marked a strategic improvement in the market / brand awareness of the Group’s range of affordable and highly nutritional food products; acceleration in B2C segments with the introduction of new product offerings such as Auntie B Spaghetti Slim and Spaghetti, as well as the introduction of new storage units (SKUs) in key categories, as well as investments in regional distribution .

“The vision of leadership and the pillar of the brand improve operational and financial efficiency. The group’s food portfolio is good for the nation and great for business; the group has focused more on local content in group-wide supply chains and investments in upstream integration as part of its long-term strategy to contribute to economic growth, ”said declared the company.

FMN added that during one of the most difficult years in recent history, the group activated a comprehensive response and mobilized considerable resources, including a resilient global supply chain to help the federal government manage the impact of the COVID-19 pandemic on the country.

“These include: expanding Nigeria’s testing capacity with 60,000 COVID-19 test kits; supporting 10,000 Nigerian healthcare workers in 15 states with a supply of $ 1.5 million in medical supplies.

“Support vulnerable communities in 12 states with a 400 million naira food donation program and provide an additional 1 billion naira to the Nigerian private sector coalition led by the Central Bank of Nigeria (CBN) against COVID-19”, the company said.
FMN said it is also supporting the development of local wheat with a strategic partnership with the Flour Milling Association of Nigeria (FMAN). The group collected more than 800 tonnes of wheat in three states and provided 493 farmers with mechanized harvesting and threshing services.

Likewise, in line with the federal government’s commitment to make Nigerian sugar self-sufficient, FMN said that one of its subsidiaries, Golden Sugar Company, had increased its investments in upstream integration to engage more cane producers. sugar in his Sunti Sugar Estate.

Sunti Golden Sugar Estate’s N64 billion investment is the largest commitment under the Nigerian Sugar Master Plan (NSMP) and also the first and only Greenfield initiative currently producing raw sugar in the country.

According to the company, the new investment in the acquisition of 5,200 ha of mountain in Sunti, brings the total area acquired for the cultivation of sugar cane to 22,000 ha and the expected increase in production will subsequently result in expansion of sugar plant capacity – construction of a 15 km all-season heavy-duty link road leading to the plant has already started.

“With this acquisition, the total development of the highlands would exceed 10,000 ha of cane, which would be mainly cultivated by small farmers hired by the company, to receive the necessary support under the existing outsourcing program, to ensure the quality of production. Cultivation at high altitudes greatly reduces the potential risk of flooding, which could wash away the sugar cane plantations, ”said FMN.

Olusanya, noted that the MNF is committed to investing a minimum of 160 billion naira in upstream integration, including the inauguration of a new sugar refinery in Nasarawa.
He said all countries, in their own way, are creating pathways for sustainable local development of goods and services that they have some level of competitive advantage to produce locally.

The GMD said: “We have invested over 150 billion naira in upstream integration over the past 10 years to support in particular the core businesses in which we are, our upstream integration plan indicates that we are an important player in the agricultural sector, a One of the main drivers for us is to help develop the local supply chain and reduce dependence on imports.

“We see this as an important part of business growth for us and our ability to continue to perform well in the sector, whether in sugar, wheat, cassava or palm oil. FMN will continue to support the growth and development of local production and manufacturing, ”he said.

Evaluating the results, analysts at Cordros Securities said the strong performance was supported by solid revenue growth (+ 34.5%) and increased investment income (+ 52.6%).

According to analysts, turnover increased by 34.5% to reach 771.61 billion naira, thanks to substantial growth in food (+ 33.5%), agro-allied (+ 32.2%) activities ) and sugar (+ 27.7%) segments.

“Likewise, support service revenues grew 136.9%, the highest in at least 10 years. Our channel checks revealed that the company’s impressive performance was supported by diverse and new product offerings across five value chains: grains, oils and fats, sweeteners, proteins and starches. The strong revenue growth was further supported by the new advertising campaigns, the restructuring of the agribusiness segment and the acceleration of the expansion of the B2C channel, ”they added.

Cordros Securities said gross margin increased 207 basis points to 13.8% as revenue growth (+ 34.5%) exceeded the increase in cost of sales (+ 30.9% ). The slower growth in costs of sales reflects the improvement in the operational efficiency of the company in a difficult business environment. As a result, gross profit jumped 62.3% to 106.76 billion naira while profit before interest, taxes, depreciation and amortization (EBITDA) rose 33.9% to 74.54 billion naira in 2021. “

The company said FMN’s profits were further boosted by the moderation of financial costs (-6.6%) following a reduction in interest on bank loans from N15.18 billion in 2020 to N9.89 billion. naira in 2021FY. In addition, we note that the N30.00 billion bond issued by the company moderated additional borrowing during the period. As a result, the net finance cost decreased 14.7 percent, supported by a 52.6 percent increase in investment income.

“We appreciate that the company has maintained widespread improvements across all business units, reflecting the positive results of product innovations, investments in its go-to-market strategy and operational efficiency. Likewise, the company has completed the restructuring of its agribusiness sector which we believe will continue to support revenue growth. However, we note that the reopening of land borders, weak macroeconomic fundamentals and high operating costs remain a significant obstacle to volume growth and profitability. From a market perspective, we expect investors to respond positively to the firm’s strong earnings, ”Cordros Securities said.


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