Nigeria’s Honeywell Flour Mills sustains 52% loss on lower sales, higher costs in H1-2023

Published October 18, 2023

NIGERIA – Honeywell Flour Mills Plc, one of Nigeria’s leading flour mills and a subsidiary of the Flour Mills of Nigeria has sustained a loss in the first quarter of this year as the company faced a lower sales volume and a higher finance cost.

The fast-moving consumer goods is involved in the manufacturing and marketing of wheat-based products, including flour, semolina, whole wheat meal, noodles, and pasta.

The company disclosed the negative performance in its unaudited interim financial statements for the first quarter (Q1) that ended June 30, 2023.

According to the financial report, the company posted a loss of N1.16 billion (US$1.5M) in the review quarter, representing a 51.56 percent drop from the N2.397 billion (US$3.1) recorded in the corresponding period of 2022.

The ICIR analysis of the reports showed that the company’s revenue, that is, total sales figure, dropped by 12.98 percent to N35.39 billion (US$46.3M) from N40.67 billion (US$53.2M), despite recording a significant decline in its cost of sales.

The company’s cost of sales fell by 21.01 percent to N31.418 billion (US$14M) from N39.774 billion (US$52M), improving its gross profit to N3.977 billion (US$5.2M) from N896 million (US$1.2M).

However, a 116.10 percent rise in the company’s finance cost to N3.14 billion from N1.453 billion streamed its operating profit of N1.798 billion and ultimately brought its bottom-line performance to N1.16 billion loss for the period.

A report by the ICIR on August 1 pointed out that fast-moving consumer goods (FMCG) companies are faced with higher finance costs arising from the companies’ inability to hedge against huge revaluation losses caused by the floating of the naira.

Worsening the situation, Honeywell flour mills have been in legal battles with Ecobank Nigeria for the past eight years.

The company had, since November 2015, battled Ecobank over the freezing of its accounts and the demand by the bank to wind up its operation’s over-indebtedness.

But in 2018, the Supreme Court upheld the Court of Appeal ruling after the apex court was approached by Ecobank to overturn the decision to return full access to Honeywell Flour Mills.

Based on the apex court determination that the ex-parte orders obtained by the bank were improper, Honeywell flour mills, therefore, sought damages at the Federal High Court (FHC)

In the judgment delivered recently on Tuesday, July 18, by a judge, Mohammed Liman, the FHC sitting in Lagos granted all the reliefs sought by the company over the freezing of its accounts by the bank.