Honeywell Flour Mills Share Price Jumps More than 200% in 9-Month
Honeywell Flour

Honeywell Flour Mills Share Price Jumps More than 200% in 9-Month

Honeywell Flour Mill Plc adds value to investors as the company share price gains big from the beginning of the year to date amidst a seesaw movement in the Nigerian Exchange. Historical data shows that in 9 months, the company share price has increased more than 200% to N3.83 from N1.18 at the beginning of the year.

In its 2021 audited financial result, the company’s earnings per share saw a meteoric rise which prompted an improved dividend payment proposal. This appears to have increased buy interest in the company, leading to heavy price appreciation.

A moderate closely-held stock, the market reacted positively to improved performance and share price witnessed a sky-high movement that keep it away from the kobo-stock category for the rest of the year.

MarketForces Africa analysts review shows that its earnings per share increased by 74% to N14.20 from N8.18 in the comparable period in 2020.

As such, the board of directors proposed to pay shareholders, 80% of whom was an insider, N7 on each outstanding share. However, Honeywell paid N4 on each share in the period to maintain a stable dividend payout policy when the stock price was N1.18.

Not minding dividend payment or daily trading, investment in Honeywell shares at the beginning of the year would have double up as at the end of the third quarter of the year.  Honeywell plays big in the food segment, engages in the manufacture, sale, and market of wheat-based products.

Founded by Ayoola Oba Otudeko on June 21, 1983, and is headquartered in Lagos, Honeywell stock market capitalisation printed at N30.37 billion at the end of the third quarter, 2021.

Siloam Global Services Limited, owned by Oba Otudeko, erstwhile Chairman FBN Holdings and son, Obafemi Otudeko control 75% of the company shares outstanding.

Meanwhile, First Bank of Nigeria Limited has a 5% equity stake in the company as of the end of the financial year 2020.  Central Bank recently removed Oba Otudeko as Chairman of FBN Holdings over a board room game that didn’t go well with the apex bank.

There’s a long-standing debt by Honeywell Group and other bank insiders according to CBN Governor, Godwin Emefiele, the CBN claims it’s been issuing regulatory reminders for the bank to restrict its credit since the past 3 years for about N75 billion indebtedness to FBN.

In Honeywell Flour Mills financial statement audited by Bakertilly Nigeria, the auditing firm said as of 31 March 2021, the company’s total bank loan facility stood at N60.48 billion.  

“We consider borrowing a key audit matter because of its materiality on the company’s financial position as of 31 March 2021”.

Honeywell hits N109.594 billion revenue at the end of the financial year 2021 ended in March, 36% above N80.450 billion recorded in the comparable period last year, reflecting an improved demand in a tight market.

Due to increased activities level, the company’s cost of sales also jumped, hitting N93.973 billion from N66.588 billion in the prior year.  This left the miller with N15.621 billion gross profit, a 13% year on year jump from N13.861 billion.

On the overhead side, the company was able to reduce operating costs. Selling and distribution expenses slowdown, though general and administrative expenses expanded, albeit marginally.

Amidst heavy leverage, the company’s finance cost increased to N6.069 billion from N4.227 billion in the financial year 2020.

The company’s financial position indicates that N37.940 billion, rising from N31.523 billion last year, is its current liabilities while N22.554 billion, falling from N26.770 billion is a long term debt.

Honeywell’s total borrowing exposure to four commercial and development banks in Nigeria: First Bank of Nigeria Limited, Fidelity Bank, Polaris and Bank of Industry alongside CBN intervention fund.

The audited statement shows that First Bank gave the company a term loan in 2017 to ease its cash flow pressure and it comes with restructure tenor of 6 years, quarterly repayment of principal and interest rate of 9% per annum.

As of the year ended 31 March 2021, the facility has a carrying value of N10.366 billion.

At the same time when Honeywell obtained the term loan, FBN also grant the company N666,666,666 CBN/Bank of Industry intervention loan.  Honeywell said in its report that the loan has a tenor of 7 years at 7% per annum starting from January 2017.

The increase in finance costs is mostly related to both its short term borrowings with long term debt movement in the period.  Honeywell explains in its audited financial statement that N2.956 billion from FBN to support working capital as of 2020 at 9% per annum.

Read Also: Flour Mills of Nigeria CEO Seeks to Rally Shareholders Wealth

Honeywell did N1.125 billion in after-tax profit, more than a 73% increase from N650.49 billion reported in the previous year.

Honeywell Flour Mills Share Price Jumps More than 200% in 9-Month

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