From a strong start in the first quarter, Flour Mills of Nigeria Plc is speeding up on the earnings track in the 2021 financial year ending March. Sales and profit accelerated in the second quarter ended September 2020 in defiance of the adverse effects of the coronavirus pandemic on corporate performance so far.
Sales revenue growth tripled from less than 15 per cent in the first quarter to over 47 per cent quarter-on-quarter in the second, amounting to over N200 billion for the quarter. After-tax profit multiplied three times to almost N5 billion over the same period.
The year-on-year position shows that sales revenue accelerated to 31 per cent at the end of the second quarter and profit jumped from 17 per cent in the first quarter to 68 per cent at the end of the second. The food and the agro-allied company is headed for another top record profit advance this financial year, having jerked up profit by 184 percent in the 2020 financial year ended March.
The company is showing a change of trend so far from an alternating rise and fall in profit that had marked its earnings records in recent years. This year looks promising to see the first sustained improvement in profit in several years. The strength to hold forth the high growth record to full-year remains a key development to watch on Flour Mills.
The company’s second-quarter report for the period ended September 2020 shows an after-tax profit of N9.9 billion from N5 billion at the end of the first quarter. The strong growth in sales revenue has been the main factor in the impressive profit performance since the preceding financial year.
A strong growth in group sales across the three main revenue lines of food, agro-allied and sugar was maintained in the second quarter. The growth rate continued to increase across the segments. Food products segment is the company’s main revenue line, accounting for roughly 61 percent of sales revenue at the end of the second quarter.
Group sales revenue amounted to over N355 billion for Flour Mills at the end of the second quarter, an improvement of 31 percent year-on-year. Revenue growth keeps accelerating from less than 9 percent at the end of the last financial year and 17 percent in the first quarter. This sets the company on the strongest revenue growth path in many years.
The company’s critical earning period lies yet in the second half, indicating that the already top record growth in revenue and profit may yet accelerate. That was the pattern in the preceding financial year when the half year turnover figure of N135 billion multiplied to N573 billion at full year.
Management continues to reinforce the strong growth in sales with moderated input cost – both of which constitute the main operating strengths of the company so far in the year. Cost of sales grew at a slower pace than sales at 27 percent compared to 31 percent. The proportion of sales revenue claimed by input cost declined from over 88 percent at the same period in the preceding year to 86 percent at the end of the second quarter.
This remains the lowest input cost margin the company has recorded in six years and conversely the highest gross profit margin over the same period. Gross profit accelerated from an already outstanding mark of 55 percent at half year to 58 percent at the end of the second quarter to stand at more than N50 billion.
Another major cost saving area is selling and distribution cost, which closed flat at N4.4 billion against the outstanding growth in sales. Net operating loss grew further in the second quarter to about N9 billion against a moderate gain in the same period in the preceding financial year.
The development claimed a good part of the cost savings but operating profit still took a big leap from 11 percent increase in the first quarter to 41 percent to N24 billion at the end of the second quarter.
At about N10 billion, finance expenses remain on the upward trend this year after a decline in the preceding year. Balance sheet borrowings were up from N104 billion at the end of the last financial year to N129 billion at the end of the second quarter. This is some reduction from N135 billion at the end of the first quarter.
Group after tax profit amounted to N9.9 billion at the end of the second quarter, which is an increase of 68 percent year-on-year. The figure is already quite close to the full year profit of N11.4 billion the company posted at the end of the 2020 financial year.
Flour Mills closed the second quarter operations with earnings per share of N2.33, improving from N1.53 per share in the same period in the preceding financial year. It earned N2.55 per share at the end of the 2020 financial year and paid a cash dividend of N1.40 per share to shareholders.
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