October 27, 2023/Cordros Report
Flour Mills of Nigeria Plc (FLOURMILL) published its Q2-24 unaudited results earlier today reporting a decline of 90.0% y/y in standalone PAT with accompanying EPS of NGN0.06 (Q2-23: NGN0.60), bringing H1-24 loss per share to NGN2.43 (H1-23 EPS: NGN1.97).
Revenue grew by 33.4% y/y, driven by substantial growth across the Food (+50.5% y/y), Sugar (+66.6% y/y) and Support services (+16.8% y/y) business segments. Meanwhile, revenue from the Agro-Allied (-28.2% y/y) segment declined. Though we await clarity from management on the specific drivers of the business segments, we suspect that sub-inflationary price increases across FLOURMILL’s product portfolio must have been the key driver for the topline growth. On a quarter-on-quarter basis, revenue grew by 11.4%.
Gross margin (+154bps) increased to 10.9% in the quarter (Q2-23: 9.3%) propelled by the higher revenue outturn for the period. For H1-24, gross margin increased by 139bps to 10.9% (H1-23: 9.5%).
Notwithstanding, EBITDA (-114bps) and EBIT (-49bps) margins for Q2-24 came in lower at 5.2% and 3.5%, respectively, underpinned by higher operating expenses (+73.5% y/y) and a substantial 96.6% y/y increase in FX losses. For H1-24, EBITDA (-199bps) and EBIT (-165bps) margins came in lower at 4.4% and 2.6%, respectively.
Net finance costs increased by 17.1% y/y, following a 26.9% y/y increase in finance costs. The higher finance cost reflects FLOURMILL’s increased debt profile (H1-24: NGN479.05 billion vs FY-23: NGN382.50 billion) in the period. Meanwhile, finance income grew markedly by 368.1% y/y.
Overall, Q2-24 PBT increased by 13.8% y/y to NGN1.20 billion (Q2-23: NGN1.05 billion). Following a tax expense of NGN384.00 million, PAT printed NGN816.00 million (Q2-23: NGN204.11 million).
Management call on Monday (30 October, 2023) at 12.30 pm Nigerian time. Click here to register.
Comment: As reflected in the numbers, FLOURMILL’s profitability was significantly impeded by higher operating expenses and net exchange losses following the devalued currency. For 2024FY, while we expect topline to sustain its stellar momentum, we believe earnings expansion will remain subdued given the effects of the new debt on the company’s books amid margin pressures from higher costs. Our estimates are under review.
