Flour Mills of Nigeria banks on turnaround initiatives to boost growth

NIGERIA-Flour Mills of Nigeria Plc (FMN), one of Nigeria’s leading integrated food and agro-allied company, envisions continuous growth in key segments as strategy to delivered improved margins and operational efficiencies which will in turn result in higher profitability.

The key areas targeted are the continuous implementation of turnaround initiatives in the business, accelerated expansion in the business-to-consumer segment, optimal operation of supply chain and further balance sheet management.

Earlier this year, the company received approval from its shareholders to merge five of its subsidiaries with its holding company under a Scheme of External Restructuring which will lead to higher profit and additional value to the entire group.

The merger involved; Golden Noodles Nigeria Limited, Golden Transport Company Limited, FMN Cement Industries (Nigeria) Limited, New Horizon Flour Mills Limited and Quilvest Properties Limited with Flour Mills of Nigeria Plc.

The company’s directors had also proposed to embark on a restructuring exercise that sought to allow each group to focus on its core market and effectively grow market share, reports The Guardian.

This was followed by the Thai Farm International Limited, subsidiary of Flour Mills of Nigeria Plc, changing its corporate name to Premium Cassava Products Limited.

The change in the cassava processing division, which is also a major stakeholder in the industrial production of Garri – Golden Penny was part of the larger group restructuring programme by the FMN management.

The restructuring processes are key as from its audited financial results for the year 2018 the company reported a decrease in gross profit from N68.8bn (US$190M) to N53.4bn (US$150M) while the operating profit reduced to N32.3bn (US$89M) from N48.2bn (US$130M) in 2017.

Profit before tax declined from N16.4bn (45M) in 2017 to N10.2bn (US$28M) in 2018 while profit after tax decreased to N4bn (US$11M) from N13.6bn (US$38M).

Flour Mills also saw a 3.37% decrease in its revenue from N542.4bn (US$ 1.5B) to N527.4bn (US$1.45).

Cost of sales increased to N474.1bn (US$1.311B) from N473.9bn (US$1.313B) while the selling and distribution expenses increased to N8.2bn (US$23M) from N6.2bn (US$17M). Administrative expenses remained unchanged at N19.4bn.

The company had proposed a dividend of N1.20 (US$3.3M) for the 2018 financial year, of which shareholders approved it at the company’s annual general meeting.

The shareholders of Flour Mills Nigeria Plc have seen N2.89bn (US$8M) increase in dividends amounting to N4.92bn (US$14M), compared to the N2.03bn (US$5.6M) dividend paid for the 2017 financial year.

Despite the 70.62% decline of the company’s profit after tax, the dividends increased as it showed a 30% decrease in financing cost and a strengthened balance sheet. Also, its total net debt reduced by N21.2bn (US$59M) while finance cost dropped by N9.8bn.

The Chairman, Flour Mills, Mr John Coumantaros, said, “Our strategy to further restructure our balance sheet base and optimize the financing costs achieved appreciable results with the significant reduction in net debt by N21.1bn (US$59M), while financing costs reduced by N9.8bn (US$27M).

“The board recognizes the importance of dividends and the need to generate returns for shareholders, hence, the increase in dividend.” he added

FMN seeks to restructure its businesses in agriculture sector as it intends to improve not just the efficiency of its various businesses in that sector but also to greatly increase the synergy within the group.

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