Flour Mills faces challenging time, but, opportunities abound
Category: Investors NewsBeat
That companies in Nigeria are operating under the most challenging environment is to state the obvious. The challenges range from the dearth of infrastructural facilities to credit squeeze in the economy.
This could be seen in the annual results being churned out by companies, where most of them are holding tightly to the rope to stay out of the red.
For Flour Mills Nigeria Plc, the story is not different, but, the company was able to grow its business with contracting profit margin.
The group Audited result for the year ended 31st March 2009 shows turnover of N180.068 billion as against N127.661 billion in 2008, a 41% increase. Profit after tax and exceptional items stood at N3.891 billion compared with profit after tax of N6.363 billion in 2008. The Board of Directors is recommending a dividend of N0.50 per share. The date of closure of register is September 28, 2009 while payment date is November 6, 2009. The Annual General Meeting is scheduled to hold at Eko Hotel & Suites, Expo Centre, Adetokunbo Ademola Street, Victoria Island, Lagos on Thursday, October 22, 2009 by 11.00a.m.
Business Hallmark believes that the current financial year would be a bit different for Flour Mills due to the improvement in power supply, which is gradually manifesting. The company should also re-arrange its competences to profit from the flour market where we know that immense opportunities exist.
Bread makers are on the increase as the population of the country currently put at about 150 million continues to expand. At the same time, the market is not short of fast foods producers as every corner of the street now hosts a fast foods outlet.
The company should also make sure that it overcomes the machinery challenge, which is common to companies with long years of existence. This always occurs as the management tries to grapple with the expanding market; it tends to forget the need to overhaul the company's equipment. The company should also get out of any debt challenge if that was responsible for the contraction in the profit after tax.
With a silver linen in the horizon, shareholders should expect a better result at the end of the current financial year and with good management of resources, the company may give more than the 50 kobo dividend it is doling out now next year.
Our forecast is that turnover is likely to increase by 45% to N261 billion in the current year from the N180.068 billion recorded in the year-end to March 31, 2009.
With Earning Per Share (E.P.S.) at 2.03, the company in deciding on the dividend payout might have considered some investment options which could be best done by ploughing back part of the profit made. The Price Earning Ratio (P.E) is currently in the multiple of 11.33, which is good considering the industry average. And with the stock priced at N22.99k last Friday, investors still have some rooms to maneuver to ensure a profit-making play.