Flour Mills earnings drop amidst high expectation from sugar business

Flour Mills of Nige­ria Plc (FMN) has recorded a drop in top and bottom line figures for the first quarter ended June 30, 2014. The current performance is coming amidst management’s high expectations that its newly established $250 million Golden Sugar Company will boost its revenue in the months ahead.
A review of Flour Mills’ un-audited financial state­ments for the three months ended June 30, 2014 shows that it recorded N2.822 bil­lion profit, which is below the N3.631 billion record­ed same period in 2013. Turnover went down from N88.963 billion in 2013 to N83.947 billion in 2014.

The drop in profitability signifies that the company has opened its new financial year with shrinking income, just as its year-end result for the period ended March 31, 2014. The depreciation in the group’s earnings has been attributed to the losses incurred on sugar business. Paul Gbededo, Group Man­ aging Director of Flour Mills Plc., disclosed in August at the company’s facts behind the figures, that for such a huge investment manage­ment did not expect to start making profit in the first year, but that it has posi­tioned the sugar business for future growth.
He explained that the sugar plant, which was just commissioned witnessed difficulty in its first year as it could not produce enough, pointing out that its entrance into the business crashed the price of sugar that was selling at N9,000 per bag to N5,500 last year.
According to Gbededo, the sugar refinery is operat­ing at 48 per cent capacity as its investment in food and agro-allied business con­stitutes 95 per cent of the company’s revenue. As part of the company’s strategy to align with government’s backward integration initia­tive, it has acquired 500 hect­ares of land in Niger State for rice cultivation.
The company plans to start production at the 350,000 metric tonnes per annum ed­ible oil processing company in Ibadan by the end of this year; while its snack business is reaching maturity with the completion of Golden snack facility in Agbara and the oil palm processing investments would start impacting on the bottom line moving forward.
Despite economic chal­lenge in the country, the board of directors has as­sured stakeholders that the company is well positioned to enhance profitability and deliver long term value to shareholders in furtherance to the strategic acquisition it made in core business areas.