By Peter OBIORA InvestAdvocate
Lagos (INVESTADVOCATE)-Flour Mills of Nigeria Plc now FMN Plc on Wednesday said it has invested $250 million in Golden Sugar Company Limited according to Paul Gbededo, group managing director/chief executive officer (GMD/CEO) of the milling industry.
Gbededo disclosed this at the company’s “Facts behind the Figures” at the Nigerian Stock Exchange (NSE) in Lagos Nigeria.
‘’For Golden Sugar, a $250 million investment, the first time was a very difficult year, we only operated for about nine months,’’ he said.
On the business of sugar production in Nigeria, Gbededo said before FMN ventured into that area last year, it was selling at N9,000 a bag, ‘’ before we came on board, sugar was selling in the Nigerian market at N9, 000 per bag, as soon as we came in, it dropped to N5, 500,’’ the FMN CEO affirmed.
He further affirmed that due to the entry of FMN into the sugar market, Nigerians are benefitting because of the drop in its prices, ‘’it’s a business that will help Nigeria not for only local consumption; but for the whole of the sub region,’’ he said.
Gbededo explaining why Golden Sugar didn’t impact much on the Group’s profit for the year said when the Nigerian government enacted the sugar master plan which was launched last year, willing investors were mandated to go back to the land and to invest in the cultivation of sugarcane.
‘’We are also investing in cultivation and crushing of sugarcane, you can see why we had this costly effect in our sugar business,’’ he said.
According to him, Golden Sugar is performing in line with expectations – volume now at 48 percent capacity utilisation.
‘’Good performances in both Food and Agro-allied divisions were partly offset by low commencement year results of Golden Sugar Co. Ltd.’’ Gbededo said.
On his part, Jacques Vauthler, chief finance officer (CFO) of FMN while explaining on the impact of the sugar subsidiary in its 2014 audited accounts said it’s was very important to note that at the time FMN closed its financials account March 31, 2014, the subsidiary Golden Sugar actually did less than one (1) year of operation.
‘’We did nine months to be precise, close to $300 million investment, to start from zero production and sales to 48 percent on an annualised basis, until last month is something excellent. So, obviously growing production gradually up, still we were having a certain amount of fixed cost, of depreciation and interest which anyway we have to gather initially with low production and sales,’’ Vauthler said.
The FMN CFO noted with the margin the company is having, they anticipate this year to have a much better result, ‘’and this is the reason we have disclosed the impact of this new business for everybody to realise what it takes to compare a matured business with a new one,’’ he said.
According to him, Golden Sugar at the initial stage, had the same number of fixed cost, lower efficiency and a little bit of production losses, ‘’but we have managed all that and we anticipate this coming year to run a profitable sugar business,’’ the CFO said.
A review of the Groups financial year end shows that profit for the year excluding Golden Sugar climbed up 22.4 percent to N9.412 billion in the review period from N7.688 billion recorded in the corresponding year of 2013.
Group revenue excluding Golden Sugar increased slightly 3.3 percent to N312.044 billion in 2014 end from N301.941 billion in 2013 end.
However, revenue of the FMN group ordinarily grew 10 percent Year-on-Year (YoY) to N332.142 billion in the review period of 2014 from N301.941 billion in the same period of 2013.
FMN also said in view of improved results, the board is recommending a dividend of N2.10 kobo per share, which represents a five percent increase over last year, and 1 for 10 bonuses to its shareholders.
