Insight Details
Flour Mills of Nig. Plc – Core Business Activities Suffer as Bottom-Line Declines
The first quarter result released by Flour Mills of Nigeria Plc shows a setback in its top-line as core business activities disappointed. Revenue declined by 10.70% to ₦133.03 billion in Q1’19 (vs. ₦148.98 billion in Q1’18), due to disappointing performance in its Foods Segment, AgroAllied Segment and Packaging Segment.
The major reason for the decline in Foods Segment can be ascribed to lower selling prices in Sugar and Flour while increased competition in animal feed market contributed to the setback in Agro-Allied Segment. However, Port Operation and Logistics and Real Estate Segment recorded a significant growth in Q1’19. Although cost of sales declined by 12.12% to ₦115.77 billion in Q1’19 (vs. ₦131.74 billion recorded in Q1’18), cost of sales to revenue ratio remains a major challenge as it stays at 87.02% in Q1’19 (vs. 88.43% reported in Q1’18). Relatively, lower cost of sales can be attributed to the reduction in material costs and reduced rent and rates. The lower cost of sales offsets the reduction in revenue and as a result, gross profit remained almost flat at ₦17.26 billion in Q1’19 (vs. ₦17.24 billion in Q1’18).
In non-operating activities of the business, net operating gain declined by 79.27% to ₦0.65 billion in Q1’19 (vs. ₦3.15 billion reported in Q1’18) The significant drop in net operating gain impacted on the profitability of the company as profit before tax declined by 15.84% to ₦5.21 billion in Q1’19 (vs. ₦6.19 billion reported in Q1’18). The company made a provision of ₦1.56 billion for tax in Q1’19 (vs. ₦1.66 billion in Q1’18) and as a result, profit after tax reduced by 19.47% to ₦3.65 billion in Q1’19 (vs. ₦4.53 billion in Q1’18). However, we are enthralled with the company’s 12-month trailing EPS as it increased by 42.21% to ₦3.11 from ₦2.18 recorded in the previous period.