FMN Plc: FX Loss, High Costs Damage Earnings

FMN Plc: FX Loss, High Costs Damage Earnings

Flour Mills Nigeria (FMN) Plc.’s revenue jumped by 33.9% year on year to N946.65 billion in the first half of its financial year 2024 from N720.57 billion in the comparable period in 2023, the company’s results show.

The increase was propelled by price adjustments amidst accelerating food inflation in Nigeria. This pushed growth in food, sugar and other support services higher.

However, the company’s Agro Allied segment went down 6.9% to N143.24 billion in the period from N153.90 billion in H1 2023.

Detail from its financial results showed the company’s profit performance was negatively affected by its exposure to exchange rate fluctuation in the forex market.

A review of Flour Mills numbers showed that the adverse effect of the FX policies resulted in a spike in the net finance cost to N32.84 billion, translating to a 49.64% surge from N21.94 billion in H1 2023.

In its earnings results, Flour Mills of Nigeria reported a foreign exchange loss of N51.22 billion, which was a significant increase when compared with N19.74 billion reported in H1 2023.

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This dragged profitability downward amidst a growing cost profile which accelerated faster than top-line growth. Consequently, the company reported a Loss before Tax in the period.

According to its financials, the consumer goods company saw a loss after tax which settled at N8.52 billion in H1 2024. Hence, it recorded a loss per share of N2.43 as profit declined by 90%

Earnings loss was propelled by higher costs due to inflation conditions that birthed a high-interest rate environment in Nigeria. The food company reported that net finance costs increased by 17.1% following a 26.9% year-on-year increase in finance costs.

Analysts said the higher finance cost reflected in Flour Mills of Nigeria’s increased debt profile totalled N479.05 billion in the first half of 2024 from N382.50 billion in the financial year 2023.

However, the company’s finance income was noted to expand markedly by 368.1% year on year, details from its results reviewed by analysts indicate.

Overall, Q2-2024 pretax profit increased by 13.8% year on year to N1.20 billion from N1.05 billion in the equivalent period. Following a tax expense of N384.00 million, PAT printed N816.00 million from N204.11 million in the same period in 2023.

As reflected in the numbers, Flour Mills of Nigeria’s profitability was significantly impeded by higher operating expenses and net exchange losses following the devalued currency.

For 2024, Cordros Capital analysts said while they expect topline to sustain its stellar momentum, they believe earnings expansion will remain subdued given the effects of the new debt on the company’s books. #FMN Plc: FX Loss, High Costs Damage Earnings Naira Devaluation Deepens Economic Crisis in Nigeria

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