[upme_private]Northern Nigerian Flour Mills released its 2013 FY to March 2013 showing revenue dropped 7.7% to N11.7billion. Gross Profit on the other hand increased 27.6% to N783million as cost of sales relative to revenue reduced. Operating Profit before other income and interest cost increased to N183million (2012: N105million). Profit before tax at the end of the period increased almost a 1000 fold to N317million. Profit after tax at the end of the period was N239million a reversal from the N136million loss it posted a year earlier.
Key Highlights
Profit and Loss Items
Revenue
- NNFM is a milling company and has as its major product Golden Penny Wheat. Its wheat business raked in N9.2billion this year compared to NN9.8billion in 2012. This alone accounted for about 85% of revenue drop for the year.Â
- Sales from Semovita also saw a 24% when compared to last year (2013: N1.67b, 2012: N1.95billion)
- This is the first revenue drop in over 5 years for the company. Unrest in the North may not be unconnected with this drop in sales.
- The wheat industry has come under intense competition from imports over the years. However, this Government this year announced plans to ban the importation of Wheat.
- The 9.5% drop in cost of sales helped cushion the effect of the drop in revenue and actually help improved margins this year by 38%.Â
Operating Expenses
- This financial year, operating cost was made up of Admin Expenses N590million (2012 FY: N497.6m) and Selling & Distribution Expenses N11million (2012: N11.2million). The low selling and distribution expenses suggest the company is spending very little on expanding distribution network around and beyond the core north were it operates preferring may be to rely on independent distributors. Â
- The improved pre-tax profits of  N317million was mainly as a result of its other income of N781million. The company also make money from the sake Confectionary flour and Golden Penny Rice (GP Rice). Both contributed N397million and N320million respectively. However, they both also carried huge operating expenses of N340million and N272million respectively. Other income provided  Net income of about N141million about 44% of Pre-tax profits. This is remarkable if you consider the fact that Confectionary Flour had zero contribution to other income in 2012. Sales of GP rice also tripled during the year.
Debt and Finance Cost
- NNFM currently has no long term debts and as such the N27million in interest it incurred was part of the interest it incurred before it paid off the balance of the N450million over drafts it obtained a year earlier.
- However to finance its operations it is important to note that the company relies on Intercompany loans from its Parent company to augment. It had N1.299billion in intercompany loans up 2.5x (2012: N363.6million).Â
Balance Sheet & Cashflow
- Trade and other receivables remained fairly stable at N550million. Core trade payable was about N312million after writing off about N64.5million in bad debts. The company strangely gives a 180days credit policy for its products and writes debts owed but unpaid once it is over one year.Â
- However, the N550million in trade debtors is only about 5% of total revenue so I guess their credit policy is working.Â
- Trade and other creditors on the other hand is high at N1.5billion because of the companies intercompany payable of N1.29billion. Core trade payables here was just N78million
- NNFM generated N1.1billion in operational cash flows as a result of lower payment to suppliers. From the N12.4billion (2012: N12.8billion) in cash it generated in 2013 it paid out N11.2billion (2012: N13.5billion). The company also spent N343million on PP&E during the period compared to N107.7million a year earlier.
- The company also has positive retained earnings of N1.4billion. In fact retained earnings makes up almost all of Net Assets of N1.6billion. A sign that they have hardly raised any new equity to expand operations preferring only to operate organically.
Share Price and Dividend
- Share price has risen 38% in the last one year and currently trades at N29.7
- P.E ratio is also 23.5x 1.8x higher that the average NSE Index P.E ratio in relative terms
- Price to Book ratio is also 3.2x which is further buttressed by its very high Net Asset Turnover ratio
- Its ROE is 16%, higher than inflation rate of about 9%. Return on Asset is also high at 5.2% owing to the fact that they have no loans and operate within their scale.
- NNFM proposed dividend of 40kobo which at current price provides a Gross dividend yield of 1.3%
- Northern Nigeria Flour Mills is a subsidiary of Flour Mills of Nigeria with the latter owning a 52.6% share.
Northern Nigeria Flour Mills Released Its 2013 to March FY results in the website of the NSE[/upme_private]
