Flour Mills of Nigeria Plc has released its second quarter result for the period ended 30 September, posting a 6 percent increase in gross profit to 20 billion naira ($125 million) from 18.9 billion naira ($118 million) in the same period the previous year, driven by increased sales from its food business.

Pretax profit increased by 5 percent to 10.4 billion naira ($65 million) from 9.8 billion naira ($64 million), while profit after tax witnessed a marginal 7 percent growth.

The company reported a strong revenue growth of 29 percent in its food operations while its livestock feed business grew 53 percent on the back of increased capacity, and its fertilizer business recovered with a 40 percent growth.

On a quarter on quarter (QoQ) basis however, sales dipped 5.4 percent to 66.9 billion naira ($380 million) due to hiked prices following increased import duties.

According to Nigerian publication, BusinessDay, a Vetiva analyst said that Flour Mills’ 8 percent cost of sales year on year (YoY) increase to 117.5 billion naira ($900 million)is an indication that the 31 percent rise in wheat prices and 15 percentage point hike in import duty to 20 percent (higher input cost) was passed on to consumers for the most part.

“Consequently, gross profit rose 6 percent YoY as margins remained relatively stable. Selling, distribution and administrative expenses came higher than previous levels, up 15 percent; we think this would have been necessary to support new capacity and product launch – during the quarter Flour Mills commissioned its West Mill plant in Apapa, pasta plant in Agbara and also launched MARIO cheese balls (the first product from its snacks/breakfast cereal portfolio),” the analyst said.

The company said earlier in the month that it would complete construction of its sugar refinery – Golden Sugar Refinery – at the end of 2012, though it would be commissioned in January 2013. It also plans to acquire an energy company, ROM Oil. Discussions are still in progress and the deal is yet to be finalised.

In September, Flour Mills notified the Nigerian Stock Exchange of its plans to bring packaging subsidiary, Nigerian Bag Manufacturing Company Plc (BAGCO) under the company. So far, the company has gotten a second approval for the merger.


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