In Q3 2023, Flour Mills of Nigeria Plc reported a 30% YoY increase in Revenue to N393.39bn (2% ahead of our N387.52bn forecast). It is also noteworthy to state that for the first time, the Company hit a trillion-naira revenue mark (9M 2023 :N1.11trn, 9M 2022: N824.98bn +35%).

The company’s steady growth in topline did not come as a surprise. Other than pricing benefits, innovation across value chains and effective route-to-market strategies drove topline growth during the reporting period. Gross profit rose by 33% YoY to N34.44bn (Q3 2022: N25.80bn), but gross margin was stable at 9%. 

Sticky Cost Pressure Cap Bottomline Gains

Despite the relatively strong revenue performance, operating profit declined by 7% YoY to N16.20bn, due to higher operating expense. Operating expense grew by 119% YoY to N18.25bn in Q3 2023, driven by a combination of a 139% YoY spike in selling and distribution expense to N5.340bn (Q3 2022: N2.26bn) and a 112% spike in administrative expense to N12.85bn (Q3 2022: 6.06bn). 

We posit that the impact of the significantly higher selling and distribution expense incurred was evident in the revenue growth, while the integration of Honeywell business was responsible for higher salaries and other staff related cost.


Flour Mill margins remain a cause for worry, as the Company is increasingly unable to turn its significant topline expansion to corresponding bottom-line growth. While we admit the integration of Honeywell Flour was key in growing volumes, it also dragged margins lower through higher operating costs. However, we are optimistic that the Company remains well positioned to achieve growth in the medium to long term, as it continues  to invest in its route-to-market infrastructure.

We revised our earnings per share for FY 2023 to N4.03 (previous: N6.20), while we also downgraded our fair value to N29.61 (previous: N31.99). Overall, we recommend a HOLD, with 6% total return estimate.

Please follow the link “Flour Mills of Nigeria Q3 2023 – Macro-Economic Headwinds Depress Bottomline” to view the whole report.

Thank you.

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