Flour Mills of Nigeria Plc (‘the Company’) Q2 2023 revenue stood at N336.77bn, translating to a 32% YoY growth from corresponding period (Q2 2022: N207.78bn). Despite the macroeconomic headwinds, the Company reported a revenue growth across all its business segment; a growth which the management ascribed to a favorable mix. We also believe that the Company’s increased penetration into new and rural markets contributed to the topline growth.

The Company’s gross margin declined marginally by 100 basis point on a year-on-year basis to 9% amid rising input cost, driven by FX pressures and heightened inflationary pressure. However, operating expense declined by 14% in reporting period.

On the backdrop of significant increase in finance costs – which we attribute to its acquisition of Honeywell, higher FX losses – which we attribute to currency depreciation and decline in its finance income; the Company reported a year-on-year decline of 114% in its non-operating profit.

This decline left profit for Q2 2023 at N204.00mn, representing a 96% YoY decline from N5.08bn reported in Q2 2022.


Despite the decline in net profit, we are optimistic that the Company remains well positioned to achieve strategic growth in the near to medium term, as it continues to invest behind its route to consumer infrastructure. For the next quarter, we expect a sustained revenue growth owing to increase in demand driven by the festive season.

In the reporting period, the Company recorded an increase in operating profit by efficiently managing operating costs and growing revenue despite the macroeconomic challenges. We expect this operating profit to be maintained going forward. We also expect a moderation in FX losses which in turn would result in bottomline growth in the medium term.

We revise our earnings per share for FY 2023 to N6.20 (previous: N6.30) owing to our expectation of sustained market growth and improved distribution, not ignoring the eroding purchasing power of consumers due to inflationary pressures. We also downgrade our fair value to N31.99 (previous: N43.72). We recommend a BUY, as we project a 21% total return; consisting of a 14% price return and a 7% dividend yield.

Please follow the link “Flour Mills of Nigeria Plc Q2 2023 – FX Losses Weigh Heavily on Profitability” to view the whole report.

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