Flour Mills of Nigeria: Maintaining impressive performance amid challenges

Flour Mills of Nigeria Plc (FMN) Plc raised after-tax profit by 126 per cent to N25.7 billion in its 2021 financial year ended March 31, 2021 from N11.4billion in 2020 financial year.

This is the second year of triple-digit growth in profit for the food and ago-allied company, having lifted the bottom line by 184 per cent in 2020.

The outstanding performance is in line with our view in the analysis of the company’s interims that “this year looks promising to see the first sustained improvement in profit in several years.”

The big profit advance in the year was powered by a top record growth of 34.5 per cent in sales revenue to N771.6 billion in 2021 from   This represents additional revenue of N198 billion generated in the year in defiance of the pandemic-induced general downturn in economic and business activities in the course of the year.

This is also consistent with our view that the company was set on the strongest revenue growth path in many years.

The company began the financial year with a strong start in the first quarter and sped up on the earnings track through the year to the strong finishing. Its key growth drivers include big gains from its agro-allied strategy.

Earnings growth was also driven by the expansion of the company’s backward integration programme across all value chains, including strategic partnerships with smallholder farmers. The stunning result is an average revenue gain of 34 per cent across all business sectors.

The company’s three main revenue lines are food, agro-allied and sugar – which grew by 33.5 per cent, 32.2 per cent and 27.7 per cent respectively. The food products segment is the company’s main revenue line, which accounted for roughly 62 per cent of group sales revenue at the end of the financial year.

The company’s effort in increasing local content in the group-wide supply chain and its backward integration programme paid off in the year through moderated input costs. Cost of sales grew at a slower pace than sales at below 31 per cent to N665 billion compared to the 34.5 per cent growth in turnover.

This translated into a significant reduction in input cost per unit of sales. The strong growth in sales with moderated input cost constitutes the main operating strengths of the company in the 2021 financial year.

At 86 per cent, the proportion of sales revenue claimed by input cost is the lowest cost margin the company has recorded in six years. Conversely, the company ended the year with the highest gross profit margin in six years as well.

Gross profit grew considerably ahead of turnover at over 62 per cent to nearly N107 billion at the full year in March 2021. This represents a gain of as much as N41 billion in gross profit in the year.

Some cost increases didn’t let the company pass all the gains in gross profit down to operating profit. This was led by net operating losses of N15.5 billion that took the place of net operating gains of almost N5 billion in the preceding financial year.

Other cost increases came from selling and distribution expenses that grew by 30 per cent to N12 billion and administrative costs that rose by 24 per cent to N29 billion. The cost increases were moderated by a turnaround from net impairment loss on receivables of about N3 billion to a net write-back of over N2 billion over the period.

Operating profit still took a big leap at 48.8 per cent to N52 billion at the end of the year. This was again boosted by an increase in finance income and a decline in finance costs, leading to a drop of 14.6 per cent in net finance cost to N15 billion.

Balance sheet borrowings were up from N104 billion at the end of the prior financial year to roughly N133 billion at the end of the 2021 financial year.

Flour Mills closed the 2021 full year’s operations with earnings per share of N6.38, rising from N2.55 per share in the same period in the preceding financial year. It has announced a cash dividend of N1.65 per share to shareholders.

The company in a statement stated that the results demonstrated a strong performance and resilience in a challenging year to capture first signs of economy recovery with accelerated Q4 growth against last year Q1’21 vs Q4 ’20: revenue gained 44 per cent, EBT added 158 per cent and PAT rose by 211 per cent.

The group delivers impressive FY top-line growth across all business segments with an average revenue growth of 34 per cent, led by growth in Agro-allied combined with investments in route-to-market and accelerated expansion in the B2C segments.

“Flour Mills leadership is consistently focused on strong discipline in operational and capital efficiency by increasing local content in group-wide supply chains and supporting backward integration programs across all value chains.

“Acceleration in B2C segments with new products offerings such as Auntie B Spaghetti Slim and Spaghetti, as well as the introduction of new SKUs in key categories, along with investments in regional distribution.

“Successfully issued N30billion corporate bond with a tenor of 5 and 7 years at 5.50 per cent and 6.27 per cent respectively, to replace expensive short-term facilities.

“The group achieved impressive topline growth for the year, aided by gains from our Agro-allied turnaround strategy.

“Our backward integration program has been expanded across all value chains, including strategic partnerships with smallholder farmers, resulting in an average revenue gain of 34 per cent across all business sectors.”

Commenting on the results, the Group Managing Director, FMN, Mr Omoboyede Olusanya, in a statement said, “Flour Mills emerges from the prevailing COVID-19 environment as a stronger, more resilient, flexible and confident business as a result of the collective strategic actions made over our 60-year history.

“I want to thank all our employees for their patience and hard work as we consistently adapted to the year’s challenges and invested significantly in our purpose of feeding the nation every day.

“FMN is now harvesting the fruits of these efforts and remains committed to braving a continuously uncertain environment with cautious optimism, innovation, portfolio advancement and other strategies outlined in our recent sustainability report.”