Honeywell Targets 20% Market Share Of Flour Milling Business

Honeywell Targets 20% Market Share Of Flour Milling Business


Post Views: 1,487 Stockbrokers Urge Directors To Consider Rights Issue, Reduced Holding Photo Caption: From left to right, Tony Ibeziako, Head, Domest...

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Photo Caption: From left to right, Tony Ibeziako, Head, Domestic Primary Market, The Nigerian Stock Exchange (NSE); Ade Bajomo, Executive Director, Market Operations and Technology, NSE; Lanre Jaiyeola, Group Managing Director, Honeywell Group, Dr. Nino Ozara, Executive Director, Manufacturing, Honeywell Group at the Facts Behind the Figures presentation at the Exchange today in Lagos

The management of Honeywell Flour Mills Plc, on Friday said it has set a market share target of 20% in the coming years, up from the current 12% in an sector that also includes biscuit, bread and pasta segments.
Addressing stockbrokers, analysts and investment journalists on the occasion of the company’s Facts-behind-the-figures to offer details of its latest financials for the year ended March 31, 2017, the Managing Director, Olanrewaju Jaiyeola, noted that the market share computation is based on the nation’s $1.2bn total wheat import bill for the period.
In a bid to reduce the company’s import dependence and foreign exchange demand, he however assured that Honeywell Flour is gradually introducing local content by substituting with home-grown wheat.
“We have milled wheat in our factory,” he said, adding that home-grown wheat is already in every Nigerian meal today in very small quantities, assuring that the company places a high premium on research and development.
As a result, he said the company’s is investment in backward integration to reduce demand for forex used for importing wheat and in the process driving 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.
He also assured that the company enjoys evenly spread acceptance across the Nigerian market, with the Northern Nigerian market previously accounting for 53 to 58% share of revenue, followed by Lagos and the South-West contributing 22%; South East, 10% while the rest was from South-South. With Lagos and South-West now accounting for up to 36%; the northern market contributes 42%; and South East, 15%.
He spoke of plans to introduce smaller pack of its products into the market as a way of making them more affordable and further enhancing market penetration.
The management, he continued, is also focused on topline growth through innovation and the number of product offerings to the market, which is why an innovation unit has been established in the company.
Commenting on the 2017 audited financials, the MD said revenue grew by just 5% to N53.228bn and operating expenses fell by 14% from N6.569bn, even as net finance cost jumped by 241% to N2.793bn. This, he said arose from the need to increase working capital following the Naira devaluation within the period, need to cash-back letters of credits and the rising bank charges on import finance facilities, in spite of which net profit stood at N4.3bn from a loss in prior year of N3.02bn, translating to earnings per share of 54 kobo.
The robust growth recorded during the just ended financial year, he continued, is being sustained, judging by the first quarter figures showing that while revenue climbed 83% to N18.27bn and tax expenses by 600% to N161m, net profit for the period ballooned by 537% to N643m or N8.11 EPS.
The challenge today, Jayeola concluded, is “to do more in terms of managing operating costs and looking forward to better returns on investment.
The management was however challenged to impress upon the board, the urgent need to seek fresh funds at a time when the market seems very receptive to rights issues to further drive down cost of finance, while challenging the core investors to consider selling down on its holdings and in the process deepen market participation and liquidity.