NIGERIA – Flour Mills of Nigeria (FMN) has demonstrated remarkable resilience in a challenging economic climate, with its stock price surging by 22% month-to-date in mid-September.
For the period ending June 30, 2024, Flour Mills reported a pre-tax profit of NGN 7.36 billion (US$9.6 million), a significant recovery from the NGN 9.33 billion (US$12.2 million) pre-tax loss recorded during the same period in 2023.
This comes despite widespread negative investor sentiment affecting Fast-Moving Consumer Goods (FMCG) companies in Nigeria, driven by the ongoing devaluation of the naira.
This strong financial performance was accompanied by a 67% year-on-year increase in revenue, a rare achievement in a sector largely struggling with foreign exchange losses and soaring import costs.
Despite this impressive performance, the stock’s price movement was relatively stagnant in August 2024, following the release of the company’s financial results on July 31.
However, by the second week of September, the stock gained momentum, soaring by over 22% and closing at NGN 54.50 (US$0.071) on September 13.
FMCG sector challenges
The FMCG sector in Nigeria has been particularly vulnerable to the naira’s sharp devaluation, which has increased the cost of importing raw materials and exacerbated debt obligations denominated in foreign currencies.
According to analysts, most FMCG companies reported pre-tax losses in the first half of 2024, compared to the same period in 2023, as they faced these macroeconomic pressures.
Flour Mills of Nigeria, however, managed to buck this trend, underscoring its strong financial and operational resilience. The company’s innovative product offerings, efficient operations, and strategic management have enabled it to navigate these challenging conditions.
Group Managing Director Boye Olusanya emphasized the company’s resilience. “Our consistent execution and growth underscore FMN’s financial and operational strength. Despite the challenging economic environment, we have solidified our position as a market leader in the food and agro-allied sector.”
Flour Mills has maintained a solid bullish trend since 2020, and this upward trajectory has continued through 2024 despite fluctuations in the broader Nigerian stock market. While the stock briefly dipped to NGN 30.55 (US$0.04) in February 2024, it rebounded by May, gaining over 40% by mid-September.
Trading volume in September was equally impressive, reaching 14 million shares, a 70% increase compared to August. The stock’s current rally demonstrates investor confidence in the company’s ability to weather the challenges posed by the naira’s devaluation and rising production costs.
Outlook for 2024 and beyond
Flour Mills of Nigeria’s first-half performance sets a positive tone for the remainder of 2024. Earnings per share (EPS) turned positive, moving from a loss of NGN 2.49 (US$ 0.0033) in 2023 to a gain of NGN 1.94 (US$ 0.0025) in 2024.
Looking ahead, analysts remain optimistic about the company’s performance, especially as it continues to expand its agro-allied and food processing segments.
Flour Mills’ strategic investments in local grain processing, including the opening of the grains application center in Kano in partnership with Bühler, are expected to further strengthen its market position and contribute to food security in Nigeria.
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