NIGERIA – Flour Mills of Nigeria Plc (FMN), a major player in the West African agro-processing sector, has reported a remarkable 342% year-over-year increase in pre-tax profit for the six months ending September 30, 2024.
After posting a pre-tax loss of N8.13 billion during the same period in 2023, the company turned around its financial performance, achieving a pre-tax profit of N19.7 billion (US$ 25.8 million).
This shift in fortunes is highlighted in the company’s unaudited financial statement for the second quarter of the 2024/2025 fiscal year, signaling a substantial recovery alongside significant revenue growth.
Revenue surge drives turnaround
According to the report, FMN’s revenue rose by 76% year-over-year (YoY), reaching N1.69 trillion (around USD 2.2 billion) compared to N964.6 billion (US$ 1.26 billion) in 2023.
This growth, driven primarily by FMN’s food and agro-allied segments, is attributed to increased domestic demand and strategic sector focus.
The food division generated the highest revenue, contributing N1.14 trillion (USD 1.49 billion), followed by the sugar segment with N274.17 billion (USD 360 million) and agro-allied products with N251 billion (US$ 329 million).
However, the revenue surge was accompanied by a 79% increase in the cost of sales, which rose to N1.53 trillion (US$ 2 billion), constituting nearly 90% of total revenues.
Escalating raw material costs—doubling from N786.5 billion (US$ 1.03 billion) to N1.42 trillion (US$ 1.86 billion)—higher wage expenses due to minimum wage adjustments, and energy price hikes squeezed FMN’s profit margins.
Despite significant revenue growth, FMN’s profitability faced challenges due to a tight cost structure. Gross profit increased by 53% YoY to N161.09 billion (US$ 210 million), reflecting margin pressures from rising production costs.
This trend echoes FMN’s 2023 performance, where revenues reached N2.29 trillion (US$ 3 billion) yet profit after tax remained a modest N3.54 billion (US$ 4.6 million) due to high production expenses.
Although foreign exchange losses were down slightly by 9%, they remained considerable at N46.54 billion (US$60.9 million) due to the naira’s depreciation, which increased the cost of imported materials. Finance costs rose 27% to N43.96 billion (US$57.6 million), reflecting either higher interest rates or increased borrowing.
A major contributor to FMN’s expense growth was the doubling of energy costs, with power expenses climbing from N21.95 billion (US$28.7 million) to N46.79 billion (US$61.2 million).
Global energy fluctuations, coupled with domestic supply constraints, intensified these costs. Additionally, selling and distribution expenses surged 145% YoY to N28.78 billion (US$37.6 million), and administrative expenses rose 44% to N36.37 billion (US$47.6 million), reflecting increased operational and logistics expenses.
Operating profit increased by 40% YoY to N105.94 billion (USD 138.9 million), while earnings per share rose 284% to 447 kobo.
After accounting for a tax expense that soared by 2075% to N5.33 billion (US$ 7 million), FMN recorded a net profit of N14.41 billion (US$ 18.8 million), a 271% YoY increase.
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