Categories: Business

Flour Mills of Nigeria: Looking beyond Nigerian borders

For decades, Flour Mills of Nigeria Plc has been a major player in the nation’s food and agro-allied industry. Now that its quest for circa 77 per cent of Honeywell Flour Mills Plc has been approved by regulatory authorities, FMN is set to take over the continent. SULAIMON OLANREWARJU reports.

With the approval granted Flour Mills of Nigeria (FMN) Plc by the Federal Competition and Consumer Protection Commission, Nigerian Exchange Limited and the Securities and Exchange Commission of Nigeria to acquire 71.69 per cent stake in Honeywell Flour Mills (HFM) Plc and 5.06 per cent stake of the company held by First Bank of Nigeria Limited, the coast is now clear for FMN to realise its vision of becoming the leading food and agro-allied group in Africa.

Over the years, though FMN has demonstrated exemplary commitment to food security in Nigeria through its investments in agriculture, livestock feed and pasta manufacturing, it has always had its eyes on the continental market with a plan to become a giant in Africa’s food and agro-allied industry. This, among other factors, propelled the Honeywell Flour Mills acquisition. The acquisition has revved up its production and marketing capacity and set the stage for FMN to become a continental powerhouse.

Commenting on the approval of the regulatory bodies for the acquisition, Mr Boye Olusanya, Group Managing Director, FMN said, “We are delighted that approvals have been received and we are all set to begin execution of this landmark transaction that would positively impact Nigeria’s food security architecture and overall competitiveness.”

He added, “Our combined brands and businesses will mean an expansive scale of food production for both Nigeria and Africa. Together, Flour Mills of Nigeria and Honeywell Flour Mills will be able to achieve rapid growth while maintaining high-quality products serving the evolving needs of our consumers. The acquisition will further serve as a catalyst for an even stronger stream of innovation that is focused on local content offerings, enabling our customers across the nation to seamlessly benefit from improved access to a wider product range and a robust pan-Nigerian distribution network.”

Mr Olusanya’s submission is in tandem with experts’ views on the implications of the acquisition for the FMN Group.

According to industry watchers, the acquisition of HFM by FMN will result in an enlarged customer base, solid market share and better channel penetration. It will also birth a strong combination of market-leading and diverse product offerings to the Nigerian population, thus strategically positioning the company for the opportunities available in the African Continental Free Trade Area (AfCTFA).

Experts also agree that the acquisition will foster an increase in shareholder value, stronger stream of innovation focused on local content offerings, increased geographical reach even beyond the shores of Nigeria and market share with additional customers and a diverse range of complementary product offerings to cater for the growing Nigerian population.

It is also believed that the acquisition will streamline supply chain and operations of both entities on the back of economies of scale, savings from improved distribution and marketing channels, technology-enabled logistics to drive down operating expenses as well as enhanced productivity and efficiencies in back offices.

In the near term, the HFM acquisition will propel FMN to unprecedented revenues of over a trillion naira.

But beyond the benefits to FMN, analysts are of the opinion that the acquisition would impact positively on all major stakeholders.

According to them, the acquisition will create in FMN a bigger and more resilient company with capacity to create more employment opportunities as well as ensuring long-term job preservation.

Customers across the nation will benefit from access to a wider product range, an even stronger stream of innovation and a robust Pan-Nigerian distribution network; accessing greater number of points of sale supported by enhanced customer focused sales teams and redistribution capabilities.

In their words, “The acquisition will increase scope to deliver product innovation to meet customers’ needs.”

Similarly, the country will benefit from the acquisition as FMN’s strategic plan focused on developing the agricultural value chain and backward integration of the food industry would ultimately improve food security.

But while the benefits accruable from the acquisition of a majority stake in Honeywell Flour Mills are still in the realm of projection, the company has continued with the superlative performance that has become its trademark over the years as shown in its third quarter unaudited financial report released not too long ago.

In that report, Flour Mills of Nigeria Plc posted a growth of 51 per cent in Q3 and 49 per cent over a period of nine months. The growth was facilitated by the Group’s unwavering commitment to continuous product innovation, improved capacity utilisation, creating good consumer experience, providing strong supply chain support and effective route to market strategies.

In the third quarter of the current financial year, the FMN Group recorded N302.2 billion revenue, which is 51 per cent higher than the N200.2 billion recorded in Q3 of 2021. The gross profit posted in the period under review was N25.8 billion, a 17 per cent improvement over the N22.2 billion posted in the previous year. Operating profit for the quarter was N16.4 billion, a 40 per cent rise, while profit before tax for the quarter was N9.8 billion, an improvement of five per cent over the N9.3 billion figure for Q3 2021. Profit after tax for the quarter was N6.5 billion, a 10 per cent improvement over the N5.9 billion posted in the corresponding period of 2021.

Similarly, the revenue for the nine-month period stood at N825 billion, this was 49 per cent higher than the N555.3 billion recorded for the same period in 2021. Gross profit for the period leapt by 11 per cent from the N72.4 billion recorded in 2021 to N80.2 billion for the period under review. In the same vein, operating profit rose by 14 per cent from N35.5 billion in 2021 to N40.4 billion in 2022. Profit after tax also moved up from N15.9 per cent in 2021 to N17 billion in 2022, an increase of seven per cent.

The Group’s Food Segment had a good showing during the period under review, posting an 18 per cent overall volume growth. The growth was bolstered by accelerated focus on the small pack size segment for the noodles category in order to increase affordability. Similarly, 22 additional vans with automated performance tracking tools were deployed to deepen the redistribution infrastructure drive. The segment was also actively involved in investments in redistribution resources while working closely with the dealers – vans, rural containers and tricycles.

The Sugar Segment similarly recorded 20 per cent revenue growth. Although the segment’s operating performance was largely impacted by the rise in raw material cost, the strategic move by the company resulted in a positive turnaround which had already started manifesting by the end of the quarter.

In the period under review, the Agro-Allied Segment recorded a volume growth of nine per cent. This is made up of 48 per cent revenue growth in the Oil & Fats value chain, 21 per cent year-on-year volume growth in the Fertilizer business and 47 per cent growth in the animal feeds value chain.

The Support Segment also put up a good performance recording significant revenue and profit growth driven by increased demand in Bagco, as well as the port business which performed well with top-line growth.Over the years, the FMN Group has demonstrated its capacity to create value for its customers, its shareholders and the society at large. As it embarks on a voyage of spreading the goodness of its products beyond the borders of Nigeria into other African countries, there is no doubt that this will engender higher returns on investment, improved shareholder value as well as the transformation of the national champion into a continental colossus.

IN CASE YOU MISSED THESE FROM NIGERIAN TRIBUNE