July 31, 2024/Cordros Report

FLOURMILL published its Q1-25 unaudited results yesterday (30 July), reporting EPS of NGN1.94 (vs loss per share of NGN2.49 in Q1-24), underpinned by robust revenue performance (+ 67.2% y/y) in the period.

Revenue grew by 67.2% y/y in Q1-25, driven by substantial growth across the Food (+61.2% y/y | 64.15 of revenue), Agro-Allied (+68.0% y/y), Sugar (+92.2% y/y | 16.7% of revenue), and Support Services (+85.4% y/y | 1.5% of revenue) business segments. We attribute the top-line increase to volume growth and a favourable mix. The higher volumes were likely due to (1) increased penetration into new markets and enhanced distribution following the company’s full launch into the Apapa free trade zone in 2024FY, and (2) gains from recently launched products such as Golden Penny chocolate spread, Mayonnaise, Chin-chin, in the North, along with new flavours (Goat Pepper Soup and Jollof Hot Hot) in the Noodles line, which were reportedly well-received by the market. On a quarter-on-quarter basis, revenue grew slowly by 4.2%.

Gross margin expanded to 11.4% (+36bps y/y), following the strong revenue expansion (+67.2% y/y). Meanwhile, the cost of sales increased by 66.5% y/y due to pressures from currency depreciation and a highly inflationary environment, leading to a 67.0% y/y rise in raw material costs during the period. Consequently, EBIT margin (+4bps y/y) increased slightly to 6.4%, amid a 70.8% y/y rise in operating expenses.

Net finance costs increased slightly by 9.2% y/y, following a 24.6% y/y increase in FX loss amid an 841.7% y/y increase in finance income

Overall, FLOURMILL recorded a pre-tax profit of NGN7.36 billion (vs pre-tax loss of NGN9.34 billion in Q1-24). Following a tax expense of NGN385.91 million (Q1-24: Nil), PAT printed NGN6.98 billion (Q1-24: NGN9.34 billion).

Comment: FLOURMILL’s results exceeded our expectations, with strong earnings growth driven by sturdy revenue growth. Looking ahead, we believe the group is well-positioned for sustained topline growth, driven by product innovation, investment in distribution channels, and price and volume increases. Additionally, we are optimistic that government efforts to stabilize the FX market, combined with management’s focus on controlling sales and marketing expenses, will further enhance operating performance in 2025E. Our estimates are under review.