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Honeywell Flour Reports Flat Full-year Profit, On 34% Revenue Growth

The board of Honeywell Flour Mills Plc, on Friday presented its much-awaited performance score-card for the year ended March 31, 2018, showing mixed performance, as enhanced revenue growth could not translate into equally robust profit after. Moreover, profit before tax fell by 11%, compared to the previous full-year following the significant decline in other income for the period, while net profit was flat, inching just 3% from that of prior year. Another factor that led to the flat profit growth was the company’s failure to earn any finance income, while finance cost rose
The directors however offered the same six kobo dividend paid in the previous year, amounting to N475.811m from earnings per share of 55.82 kobo from 54.29kobo, in what may suggest the management’s decision to boost its reserve and reduce banking borrowing that could bloat financing cost.
Sales revenue stood at N71.476bn, an increase by about N16.476bn or 30.95% from N53.227bn; with the company’s Apapa plant being the cash cow, accounting for N59.134bn revenue, up from N43.579bn; while the Ikeja plant contributed N12.342bn, up from N9.648bn. The company is yet to begin export of its products as all of the revenue was earned domestically.
Cost of sales increased by N14.908bn or 36.79% from N40.515bn in 2017, to N55.423bn, N44.106bn of which was incurred in Apapa as against the previous year’s N32.523bn, and N11.317bn in Ikeja from N7.991bn; leaving gross profit of N16.052bn, as against N12.712bn in 2017, N16.052bn and N1.024bn of which came from the Apapa and Ikeja operations respectively.
A breakdown of the cost of sales showed that raw and packaging materials gulped N48.103bn from N33.597bn; plant maintenance and power cost dropped marginally to N2.371bn from N2.425bn; depreciation (cost of sales) stood at N2.535bn from N2.235bn; among others.
Other income slowed down to N202.217m from N1.211bn, representing a N1.009bn or 83.31% decline; as the company did not record foreign exchange gain for the period, compared to N1.116bn in 2017; while sale of by-products rose to N120.193m from N72.736m; just as sundry income increased from N22.763m to N67.858m.
Selling and distribution expenses increased by N1.299bn or 38.02% from N3.418bn to N4.718bn; just as administrative expenses reduced marginally to N2.059bn from N2.243bn. Operating profit stood at N9.477bn, compared to the previous N8.262bn.
Finance income was nil, compared to N934.35m in 2017; finance costs cost grew to N4.604bn from N3.727bn, resulting in net finance cost for the period of N4.604bn from N2.792bn.
Profit before tax dropped from N5.469bn in 2017 to N4.872bn; while tax expenses dropped to N445.313m from N1.164bn; resulting in net profit of N4.426bn, compared to N4.304bn, which translated to 55.82 kobo, up from N54.29 kobo.
Recall that the company’s Q1 result showed an 83% rise in revenue at N18.27bn, while net profit ballooned by 537% to N643m, translating to earnings per share of N8.11, following which the managing director, Olanrewaju Jaiyeola, assured the capital market community at its facts-behind-the-figure that the management is poised “to do more in terms of managing operating costs and looking forward to better returns on investment.”
He spoke of the company’s investment in backward integration to reduce demand for forex used for importing wheat and in the process drive down cost of production, while increasing capacity utilization from between 80 and 85% and enhancing returns on investment.
In this way, he stressed, the management is determined “to sweat out our assets by raising capacity utilization,” which is why the Honeywell Foods and Agro-allied Industrial Complex is being constructed at the Sagamu, Ogun State to enable access to incremental capacity, while using technology to drive the entire business process to optimize returns on investment. The first phase of the complex- the pasta plant, he assured would be completed in the 2018 Q1, after which construction of swing mill would commence (READ MORE).

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