Flour Mills of Nigeria recorded a sharp decline in profit in the three months ended June 30, 2015, group’s results for the period showed.
In a filing with the Nigerian Stock Exchange, the company reported that its profit after tax fell to N972m from N2.823bn it reported in the same period a year ago.
The results also showed that the group’s profit before tax declined by 66.5 per cent year-on-year from N3.545bn to N1.88bn.
This is despite the fact that Flour Mills revenue was relatively flat at N82.281bn, two per cent lower than the N83.947bn it reported in the corresponding period of 2014.
The decline in profits came despite efforts by the group to cut costs. For instance, the cost of sales declined by 2.46 per cent from N74.233bn to N72.405bn; selling and distribution expenses fell by 2.47 per cent from N1.334bn to N1.301bn, while administrative expenses fell by 1.2 per cent from N2.486bn to N2.456bn.
A statement by the Group Managing Director, Flour Mills, Mr. Paul Gbededo, attributed the poor performance to the effect of the daunting challenges posed by strong macroeconomic headwinds.
These challenges, it said included foreign exchange volatility and declining value of the naira, leading to a rise in the cost of imported raw materials and spare parts as well as worsening logistics/traffic situation at Apapa, which hindered product evaluation and delivery, resulting in loss of value.
Others are disruptions of business operational activities during the April 2015 general elections largely as a result of uncertainties and apprehensions about the outcome of the elections and security challenges.
“The combined efforts of these extraneous factors led to increases in cost of input and put pressures on margins. Unfortunately, the rise in cost could not be fully offset by corresponding increases in product prices due to dwindling consumer spending power coupled with increased competition for market share,” Flour Mills said.
“As a result of the foregoing, the financial performance for quarter one was less than expected, inspite of tight control over group overheads.”
The group, however, said it remained optimistic and that it would continue to reward the trust and support of the shareholders and other stakeholders despite the challenges.
It added, “Looking ahead, we are optimistic that increased sales and marketing activities should enable our group increase its revenue. Priority is focused on the successful launch of our new breakfast cereal product “Daily Delight” in addition to increased distribution of our recently launched edible oil, spread and margarine.
“Management is confident that by growing our top line and improving group synergy, coupled with continuous controls on overheads and financial expenses, the coming quarter should result in improved performance.”
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