Tuesday, February 21, 2017 11:05 AM /ARM Research
Last Friday, the management of ,FLOURMILL, (FMN) hosted a conference call to discuss its 9M 2017 financial result as well as outlook over the rest of the financial year. Please find below key discussion points from the presentation.
Despite the macroeconomic challenges, 9M 17 revenue rose 48% YoY largely reflecting impact of price increases (+30-40% YoY on average across product lines) as the company attempts to pass-through effect of higher input cost to consumers.
On volumes, the company recorded sizable growth in its fertilizer business (in the agro-allied division) where volumes jumped 30% YoY while modest volume growth (single digit) was recorded across other product lines.
Figure 1: YoY revenue growth across businesses over 9M 17
Source: Company’s financials, ARM Research
The CFO attributed higher COGS (+43% YoY) to impact of naira weakness on raw materials as well higher energy expenses stemming from increased utilization diesel as gas supply challenges lingered during the review period. Elsewhere, salary negotiations with labour unions largely underpinned the 24% YoY rise in admin expenses.
The company sources FX from a variety of markets (interbank, parallel, as well as CBN and commercial forward markets) with the blended value used in translating its FCY position. Mr. Vauthier, FMN’s CFO, noted that the bulk of the FX loss stemmed from trade payables even as the company revalued a $20 million loan (4.2% of total borrowings) for its real estate business over the period.
The CFO attributed the jump in borrowings (+41% YoY to
N233 billion) to financing higher cost of imports. Particularly, he noted that pre-payment and deposits for imports (letter of credit) and forward contracts amounted to N49.7 billion over 9M 17 vs. N9 billion in the previous year. He however noted that the company’s net borrowings only rose a modest 18% YoY to N169.1 billion..
Management expects top-line growth to remain buoyed by higher prices and modest volume growth. The foregoing combined with continued cost curbing measure should bolster earnings. On mitigating FX challenges, the CFO averred that the company plans to increase exports in a bid to finance 10% of its FX needs.
We remain positive on FMN with current price of
N17.98 at a 38% discount to our FVE of N24.73.
1. Flour Mills of Nigeria Results Review - Strong Q3'17 Results; Maintaining OP Rating
2. Flour Mills of Nigeria Plc - Minutes from Meeting with Management
3. Flour Mills of Nigeria Plc - ₦9 billion FX Losses Debase Strong Topline growth
4. Flour Mills of Nigeria Reports Q2'17 Results; Sales Grows by 43% YoY
5. Flour Mills of Nigeria Plc Grows PBT by 394% YoY to N5.9bn in Q1'17 Results
6. Flour Mills of Nigeria Plc UNICEM Sale Masks Earnings Challenge
7. Flour Mill Plc Rated Neutral as Shares Underperform the ASI; Sheds -28.5% YTD
8. Benefits from Investment Sales in UNICEM Help to Improve Flour Mills Bottom-line
9. FLOURMILL Declares N14.42 billion PAT Proposes N1 Final Dividend in 2016 Audited Result SP N21.50
10. Flour Mills Plc to File Audited Financial Statements On or Before 14th July, 2016
11. FLOURMILL Revenue picks up amidst declining consumer spending and challenging business environment
12. Flour Mills of Nig Plc Q3 2016 Result - Words from Management
13. Flour Mills of Nig records negative PBT PAT in Q3-15 16 Downside risks remain
14. FLOURMILL Declares N19 billion PAT in Q3 16 Result SP N18.05k
15. FLOURMILL Appoints Joseph Odion Umolu as Company Secretary Effective Jan 1 2016
16. FLOURMILL Sales Grows by 17 YoY in Q2 16 Results Shares Rated NEUTRAL
17. FLOURMILL Declares N24.02 billion PAT in Q2 16 Result SP N21.16k
18. FLOURMILL Stock is heading towards south side with descending triangle formation
19. FLOURMILL falls back to 2010 price-range on fresh sell pressure