People & Money

Flour Mills Q1 Profit Jumps to N5.4 billion, CBN’s Sugar Policy to Support Profitability

Recently, the Central Bank of Nigeria (CBN) announced that importing raw sugar into Nigeria will be restricted to three companies -BUA Sugar (BUA), Dangote Sugar Refinery (DSR) and Golden Sugar Company (a subsidiary of Flour Mills of Nigeria). The statement by the Central Bank noted that these companies had made notable progress in their respective backward integration projects (BIPs), i.e investment in domestic sugar production.

Prior to this circular, the CBN had in April 2021 indicated that it would include sugar and wheat in the list of items barred from accessing foreign exchange (FX), stating that Nigeria could produce these items domestically. Data from the National Bureau of Statistics (NBS), however, show that the value of sugar imports are negligible, accounting for less than 2% of the country’s total import bill.

Based on findings by the United States Department of Agriculture (USDA), the three firms have committed to spending around US$776.5m in their backward integration projects. DSR has reportedly invested US$334.1m, while BUA and FMN have spent US$300m and US$142.4m respectively.

Also Read: Dangote Cement Lists Additional Shares on NSE

With this new policy, production costs for the three companies will not be impacted by the depreciation of the Naira. It could also help generate additional revenues for the companies as they help excluded companies import sugar at a fee.

FMN Q1 2021 results were quite impressive; analysts are forecasting an improved growth outlook. A close look at the numbers show that FMN has deepened its footprint in the consumers market with sustained double-digit growth in its topline, on the back of supportive volume/price mix despite the stiff competition across its business verticals.

While sales were N771.608 billion, rising by 34% from N573.734 billion recorded in 2019/20, PAT increased by 10% from N5 billion to N5.4 billion. As such, in the first three months of 2021, retained earnings jumped to N95.986 billion from N90.905 billion.

Commenting, Omoboyede Olusanya, the Group CEO said, “The result shows a strong start to the year and a promising indication of the business’s future as we pursue our strategy of operational efficiency and long-term growth.

“… I envision even more organic growth across the group, fuelled by our expanding ethos of putting consumers at the heart of our business…I am optimistic that we will meet our year-end growth targets while improving operational efficiency, lowering finance costs and ultimately increase shareholders wealth”.

Also Read: Business File Today: Flour Mills of Nigeria Donates COVID-19 Relief Products to Kano State, House of Reps Supports Two-Month Power Supply Waiver…

In its equity report, CSL Stockbrokers noted that FMN has continued to invest in restructuring its businesses and improving production processes.  The company is now focused on improving the proportion of locally sourced raw materials in its raw material mix. However, analysts spotted rising input costs as a key downside to the company’s operation but also noted the CBN directive allowing only three sugar refining companies to import sugar into the country would create some support in an otherwise unstable FX environment.

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