Flour Mills of Nigeria Plc Q2 2021 Results: Profit Rises on the Back of Rising Sales Volume

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Thursday, November 12, 2020, / 01.45 PM/Proshare Research/ Header Image Credit: FMN

 

Flour Mills of Nigeria Plc recorded an impressive result in Q2 2021 despite a grim local  economic outlook. The rise in profit was driven by the rise in revenue, as its revenue grew by +31.15% in Q2 2020 to N355.11bn. Its profit before tax grew significantly by +69.29% in Q2 2021 to N14.61bn.

 

Highlights

  • Revenue grew by +31.15% in Q2 2021 to N355.11bn.
  • PBT grew soared by +69.29% in Q2 2021 to N14.61bn.
  • Administrative expenses grew by +23.67% to N13.01bn in 2021 while its selling & distribution expenses declined by -1.56% to N4.41bn in Q2 2021.
  • Equity increased by +5.29% in Q2 2021 to N159.99bn.

 

Rising Profit Momentum Sustained


Profitability

Flour Mills of Nigeria Plc recorded a significant improvement in its profit before tax as its profit before tax increased by +69.29% in Q2 2021. Its profit rose from N8.63bn in Q2 2020 to N14.61bn in Q2 2021 (see Chart 1).


Chart 1: FMN Plc Profit (N'bn)

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Source: Proshare Research, FMN Plc Financial Statement

 

A breakdown of profit figures reveals that FMN Plc recorded an increase in profits in all its operational segments except for its support services segment which recorded a loss. The major source of its profit before tax was from the agro-allied segment of the group with a PBT of N6.31bn. Furthermore, profits recorded by other segments of the group were Food N5.61bn, Sugar N4.26bn while support services recorded a loss of N1.57bn. The segment with the highest percentage increase in profits was the agro-allied segment which recorded a profit of N6.31bn in Q2 2021 from a loss of N135.09m in Q2 2020 (see Chart 2).

 

Chart 2: FMN Plc Operating Segments Profit (N'bn)

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Source: Proshare Research, FMN Plc Financial Statement


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Revenue

There was a significant improvement in FMN Plc revenue in Q2 2021, as its revenue rose by +31.15%. Its revenue rose from N270.76bn in Q2 2020 to N355.11bn in Q2 2021 (see Chart 3).

 

Chart 3: FMN Plc Revenue (N'bn)

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Source: Proshare Research, FMN Plc Financial Statement

 

FMN Plc's major source of revenue was from the food segment of its operation. The revenue generated by the various operating segments were Food N215.89bn, Agro-Allied N72.06bn, Sugar N58.19bn, and Support Services N8.96bn. Its agro-allied segment recorded the highest percentage increase in revenue of +45.87% in Q2 2021 (see Chart 4).

 

Chart 4: FMN Plc Operating Segment Revenue (N'bn)

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Source: Proshare Research, FMN Plc Financial Statement

 

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A Tale of Different Outcomes


Expenses

While its administrative expenses rose by +23.67% in Q2 2021, its selling & distribution expenses declined slightly by -1.56% in Q2 2021. Administrative expenses rose from N10.52bn in Q2 2020 to N13.01bn in Q2 2021 while its selling and distribution expenses declined from N4.48bn in Q2 2020 to N4.41bn in Q2 2021 (see Chart 3). The rise in administrative expenses could be attributed to the significant rise in Depreciation & amortization by +51.59%, Subscription & donations +153.38%, and Salaries, wages and other staff costs +38.4% (see Chart 5).

 

Chart 5: Administrative Expenses, Selling and Distribution Expenses (N'bn)

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Source: Proshare Research, FMN Plc Financial Statement

 

A look at Shareholder's Funds

Equities

FMN Plc shareholder's fund grew slightly by +5.29% in Q2 2021. Its shareholder funds rose from N151.95bn in Q2 2020 to N159.99bn in Q2 2021 (see Chart 6).

 

Chart 6: FMN Plc Equities (N'bn)

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Source: Proshare Research, FMN Plc Financial Statement

 

Activity Ratio- Dealing With The Sweat Work


Debt-to-equity ratio


FMN Plc's debt to equity ratio as of Q2 2021 stood at 80.76% from 80.64% in Q2 2020. Although there was a relative improvement in FMN Plc debt-to-equity ratio when compared with previous years of the same quarter, the management would need to strategically reduce its debt-to-equity ratio further, to improve its investment outlook (see Chart 7).


Chart 7: FMN Plc Debt-to-equity Ratio (%)

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Source: Proshare Research, FMN Plc Financial Statement

 

Current Ratio

FMN Plc's current ratio increased from 1.09 in Q2 2020 to 1.23 in Q2 2021. This indicates an improvement in its liquidity and implies that FMN Plc's current assets can cover N1.23 of every N1 of current liabilities (see Chart 8).

 

Chart 8: FMN Plc Current Ratio

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Source: Proshare Research, FMN Plc Financial Statement

 

Acid-Test Ratio

FMN Plc's acid-test ratio improved from 0.43 in Q2 2020 to 0.63 in Q2 2021. This implies that its liquid assets can cover N0.63 for every N1 current liabilities. Although low, the acid-test ratio of 0.63 was the highest ratio recorded since Q2 2015 (see Chart 9).


Chart 9: FMN Plc Acid-Test Ratio

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Source: Proshare Research, FMN Plc Financial Statement

 

Sunny Outlook Amid Storms

 

Despite the various economic headwinds such as the weakened consumer purchasing power, fears of a second wave of the coronavirus, rising unemployment, disruption in supply chains, and poor capital inflow the outlook for Flour Mills of Nigeria Plc remains positive. Its improved business-to-customer channels, investment in its route-to-market, and a more robust product offering would help keep the group afloat amidst economic headwinds going forward.



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