By Yakubu LAAH InvestAdvocate
Lagos (INVESTADVOCATE)-Flour Mills of Nigeria Plc on Thursday said it will cut its capital expenditure by almost half in 2015, down from N40 billion a year ago on dwindling economy, a Reuters report quoted John Coumantaros, chairman of the company at the Reuters Africa Investment Summit.
The declining economy caused by weakening naira, falling oil prices and insecurity has affected consumer spending
Coumantaros said Flour Mills had spent around $750 million over the past 3-5 years to build capacity but would expected to spend around 19 billion naira ($95.53 million) this year, from cash flows and development loans.
Last year, the company had planned to invest $1 billion over the next 3-5 years to fund growth and expand into West Africa.
According to Coumantaros, the company with a focus on food processing, agriculture and logistics was shifting focus to driving efficiencies and cutting cost to deliver growth.
“Rather than growing, investing and expanding, we now have to look inwards,” Coumantaros said.
The report says Nigeria expects to lower its forecast for 2015 economic growth again, after cutting its forecast to 5.54 percent in January, as oil prices fell and the naira weakened further last month.
It further affirmed that revenue for the manufacturer of pasta, flour, vegetable oil and livestock feed grew 10-15 percent over the last five years. The chairman of Flour Mills expected that growth rate to continue this year largely due to the inflationary effect of a weaker naira.
Shares in Flour Mills have shed 10.7 percent so far this year, outperforming the drop in the main share index down 11.6 percent.
At the close of business on Thursday at the Nigerian bourse, shares price of the company lost 0.08 kobo; dropping 0.23 percent.
The report says Coumantaros was bearish on the outlook for the naira, but said he expected the fall to enable Nigeria reduce reliance on imports and consumer goods made at home, an advantage for Flour Mills.
He noted that Flour Mills’ reported half-year results in November, with profits down 21.3 percent to 5.77 billion naira. Revenues also fell to 165.54 billion naira.
“We’ve definitely seen the spending power of the consumer slow … in certain areas like biscuits … when one tries to increase prices there is a corresponding drop in demand,” Coumantaros added.
The Flour Mills chairman said the company, set up more than 50 years ago in Nigeria, was on track with its expansion plan into the rest of Africa over the 3-5 year period in order to tap into a greater population on the continent and diversify revenues.
