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FMN grosses revenue growth to 51.1% y/y

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Flour Mills of Nigeria Plc (FLOURMILL) published its Q3-24 unaudited result after market close on Friday (26 January), reporting standalone EPS of NGN2.65 (Q3-23: NGN0.90) underpinned by solid revenue growth of 51.1% y/y. Meanwhile, the 9M-24 EPS settled at NGN0.22 (NGN2.87), impacted by the weak performance in H1-24.

Revenue grew by 51.1% y/y in Q3-24 (9M-24: +40.0% y/y), driven by substantial growth across the Food (+38.5% y/y), Agro-Allied (+43.1% y/y), Sugar (+115.5% y/y) and Support services (+35.7% y/y) business segments. We believe the broad-based topline expansion reflects (1) gains from the recently introduced value products – Golden Penny Choco, Golden Penny Jollof Hot Noodles & Cinnamon flavored Chin Chin – in the Food segment, (2) a favourable price/volume mix across its product portfolio, and (3) increased investment in its B2C channels.

On a quarter-on-quarter basis, revenue grew by 17.0% with expansion in all business segments – Food (+10.3% q/q), Agro-Allied (+45.2% q/q), Sugar (+24.2% q/q) and Support services (+13.3% q/q).

Gross margin for the quarter expanded by 123bps y/y to 21.0% (Q3-23: 8.8%), as the stronger revenue expansion (+51.1% y/y) effectively eased the impact of the higher cost of sales (+30.8% y/y). The cost pressures stemmed from the pass-through effects of currency devaluation and the high inflationary environment during the period. However, EBITDA (-178bps) and EBIT (-110bps) margins settled lower at 5.9% and 4.4%, respectively, impacted by increased FX loss (+671.7% y/y to NGN77.08 billion) and operating expenses (+9.7% y/y).

Net finance costs increased by 17.1% y/y, following a 24.0% y/y increase in finance costs amid a 646.1% y/y increase in finance income. We attribute the higher finance costs to the increased loan facilities FLOURMILL obtained in the review period. As of 9M-24, total borrowings increased by 38.5% YTD to NGN484.22 billion (2023FY: NGN349.69 billion).

Overall, Q3-24 standalone PBT grew by 29.6% y/y to NGN8.52 billion (Q3-23: NGN6.57 billion). Following a tax expense of NGN261.99 million, PAT printed NGN8.26 billion (Q3-23: NGN4.32 billion).

Management call today (29 January 2024) at 1.00 pm Nigerian time. Click here to register.

Comment: We cite FLOURMILL’s continuous product innovation and effective route-to-market strategy as the major drivers for continued solid financial performance across the group’s core business segments. Over the rest of the year, we remain optimistic about the prospects for further topline expansion on (1) increased production capacity, resulting from recent acquisitions of Honeywell Flourmills and Port Harcourt Flourmills, (2) modest price increases, and (3) expanded distribution network. Nonetheless, we believe the company’s performance will be constrained by the sustained impact of higher FX losses on its net operating income.

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