Flour Mills of Nigeria presented its unaudited financials for the first quarter ended June 30, 2019, showing flat growth in revenue, marginal growth in cost of sales, even as expenses were kept in check, in addition to a drop in finance costs and lower income tax expense resulted in 26.56% reduction in profit after tax for the period.
The management linked the finance cost drop year-on-year to the fact that the group’s deleveraging strategy is beginning to achieve the desired results.
Revenue for the period rose marginally to N134.745bn from N133.028bn; a breakdown of the sale revenue showed that the food segment remained the dominant contributor to revenue. It, however, dropped slightly from N83.699bn in the first quarter of 2018 to N81.556bn; followed by agro-allied segment’s N25.638bn, compared to N24.704bn. Sugar contributed N24.08bn to gross revenue, rising from N20.015bn; while income from support services slipped slightly from N4.609bn to N3.47bn.
The agro-allied division, the company told investors through the NSE, remained on track during the period under review, “largely due to improvement in Premier Feds and robust growths recorded in Golden Fertilizer” even as strong economic headwinds and depressed consumer demand.
Cost of sales stood at N118.272bn, up from N115.768bn; the lion’s share of which was the N101.381bn that went into material costs, a marginal increase from N100.152bn in 2018; followed by depreciation at N4.401bn from N4.369bn; and the N4.173bn direct staff costs, which rose from N3.652bn; among others. This resulted in a gross profit of N16.472bn, down from N17.26bn.
Selling and distribution expenses stood at N2.037bn, as against N2.02bn; administrative expenses inched slightly from N4.686bn to N4.666bn; while net operating gains slumped to N126.171m from N653.642bn. Operating profit, therefore, fell from N11.207bn in the first quarter of 2018 to N9.894bn, representing a decline of N1.312bn or 13.26%.
Investment income dropped also from N208.661m to N162.367m; while finance costs dipped by N1.647bn or 26.56% from N6.202bn to N4.554bn
On the strength of the drop, profit before tax rose marginally from N5.213bn to N5.502bn, which was further enhanced by the drop in income tax expense from N1.564bn to N1.295bn. Net profit for the period, therefore, climbed by N587.17m or 16.08% from N3.649bn in 2018 to N4.236bn, which translated to Earnings Per Share of 103 kobo, up from 90 kobo.
The statement by Joseph Umolu, the company secretary and director, legal services quoted the group chief executive, Paul Gbededo as saying the result “is a good start to the year and a great reflection of the direction that the business is headed as we continue to push our strategy of operational efficiency and sustainable growth.”
He envisages “an even more organic growth across the food segments, with anticipated moderations in cost of sales, as global wheat prices reduce and our improved investment in aligning marketing, sales and distribution activities bost earnings and increase market gains.”