A combination of high costs at its Ikeja factory and competition may be weighing on Honeywell Flour Mills profits and dividend payout. Honeywell Flour Mills is our stock pick for the week.
About the company
Honeywell Flour Mills was registered as Gateway Honeywell Flour Mills Limited on 21st of June 1983. The company changed its name to Honeywell Flour Mills in 1995 and became a public limited liability company in 2008, and was listed on the Nigerian Stock Exchange in 2009.
The company is into the manufacture and marketing of wheat-based products including flour, semolina, whole wheat meal, noodles and pasta.
Siloam Global Resources holds 5.9 billion shares or 75% of the issued share capital, while First Bank of Nigeria Limited holds 400,000 million shares or 5%. Siloam Global is ultimately controlled by Oba Otudeko and his son Obafemi Otudeko (Jnr).
Full-year results for the 12 months ended March 2018. Revenue increased from N53.1 billion in 2017 to N71.4 billion in 2018. Profit before tax dipped slightly from N5.4 billion in 2017 to N4.8 billion in 2018. Profit after tax increased marginally from N4.3 billion in 2017 to N4.4 billion in 2018.
The company has proposed a dividend of N0.06 per share, unchanged from last year. In essence, it is paying out 10.7% of its profits.
Current share price –N1.94
Year High: N3.52
Year Low: N1.96
Year to Date: -7.62%
One year return: 1.95%
Chances of the Stocks going down or up
Investors are unimpressed with the company’s dividend, which was unchanged from the prior year. The stock would most likely witness a downward trend in the short term.
The stock’s poor performance year to date, is a signal investors are also unsatisfied with its low payout ratio.
Valuation using P/E: The stock is currently trading at a PE ratio of 3.57 times earnings, much lower than the average PE ratio on the NSE.
Honeywell is one of the smallest of the four listed flour milling companies on the Nigerian Stock Exchange, slightly bigger than Northern Nigeria Flour Mills (a subsidiary of Flour Mills of Nigeria Plc) which made just N2.8 billion in revenue for the 12 months ended March 2018.
Profit from the company’s Ikeja factory fell sharply to N89 million in 2018 as against N780 million in the prior year. This was largely due to the increased cost of sales and absence of foreign exchange gains.
The spike in the cost of sales was due to an increase in the cost of raw and packaging materials.
The firm may need to keep a tighter rein on costs as it had the highest increase in the cost of sales among the listed millers.
The Ikeja plant is largely concerned with the production of noodles and pasta, indicating competition in that space may be preventing the company from passing down increased costs to consumers.
Dangote Flour Mills in November last year, disposed of its noodle production lines located in Ikorodu and Calabar to Dufil Prima Ltd ( which makes Indomie noodles) in a deal valued at N3.7 billion
The company is currently constructing a plant at Shagamu, so cost pressures may still remain in a while.
Dangote Cement loses N92 billion on NGX, as investors digest Q1 2021 financial results
The NGX All-Share Index and market capitalization declined by 0.92%, as shares of Dangote Cement and MTN declined.
The stocks of top cement companies on Wednesday closed in the downline as investors sold off stakes in the shares of Dangote Cement despite impressive Q1 2021 results.
Data tracked on the Nigerian Stock Exchange revealed that the shares of Nigeria’s most capitalized company lost a whopping N92 billion in market value, at the back of a 2.49% decline in the share price of the leading cement producer.
On the flip side, shares of BUA Cement, another key producer in the Nigerian cement industry closed flat on the exchange today, while Lafarge Africa lost a meagre N1.6 billion of its market capitalization, triggered by a 0.47% decline in its share price.
The impact of this decline on the NSE Industrial Index
The 2.49% decline in the shares of Dangote Cement weighed heavily on the Industrial index, an index that tracks the performance of industrial companies listed on the Nigerian Stock Exchange.
At the end of the market today, the industrial index closed lower at 1918.94 index points, driven by the N92 billion market value loss which Dangote Cement suffered today on the exchange.
The index depreciated by 1.19% to print its biggest loss in a day since the 3oth of March when it depreciated by 1.90%.
Decline in Dangote Cement and MTN Nigeria shares weighed on the Nigerian Stock Exchange
The Nigerian Stock Exchange NGX, closed on a negative note today largely occasioned by the decline in the shares of MTN Nigeria and Dangote Cement.
The shares of MTN Nigeria suffered a market value decline of 4.65%, to close the day lower at N162 per share as investors continue to price in the impact of regulatory restrictions on new SIM sales and activations on the revenue and earning power of the company. Mobile subscribers on the MTN’s network declined by 5 million to 71.5 million in the first quarter of 2021.
This bearish sentiments in the shares of MTN and Dangote Cement both led to the NGX All-Share Index and market capitalization decline of 0.92%, to close lower at 39,111.30 index points and N20.468 trillion respectively.
Conoil, Courtville soar as NGX ASI plummets
The All-Share Index decreased by -0.81% to close at 39,114.73 from 39,433.81.
The Nigerian Stock Exchange market maintained the bearish momentum speculated by analysts. The All-Share Index decreased by -0.81% to close at 39,114.73 from 39,433.81.
• Nigerian Stock Exchange market value currently stands at N20.64 Trillion. Its Year-to-Date (YTD) returns currently stand at -2.87%.
• The market breadth closed negative with the bears as CONOIL led 25 Gainers, and 20 Losers topped by BOCGAS showing a hint of consolation.
1. CONOIL up +10.00% to close at N18.70
2. COURTVILLE up +10.00% to close at N0.22
3. SEPLAT up +9.99% to close at N604.40
4. LINKASSURE up +8.62% to close at N0.63
5. ACCESS up +5.19% to close at N8.10
1. BOCGAS down -9.99% to close at N12.25
2. LIVESTOCK down -9.90% to close at N1.73
3. SCOA down -9.66% to close at N2.15
4. REDSTAREX down -9.59% to close at N3.11
5. REGALINS down -9.38% to close at N0.29
The Nigerian stock market continued the bearish run held yesterday as it posted losses once again at the end of the trading session today.
• Market sentiments tend toward consolidations as the NGX ASI closes with 25 Gainers and 20 Losers.
• Nairametrics advises cautious buying in this era of growing uncertainties.
Nairametrics | Company Earnings
Access our Live Feed portal for the latest company earnings as they drop.
- 2021 Q1 Results: FTN Cocoa Processor Plc reports loss after tax of N162.21 million
- Tantalizers Plc reports a loss after tax of N97.75 million in FY 2020 in Q1 2021.
- Courteville Business Solutions Plc proposes final dividend of 3 kobo per share for FY 2020.
- 2020 FY Results: UPDC Real Estate Investment Trust records over 500% growth in Profit after tax.
- Sovereign Trust Insurance records a 43% surge in profit after tax to N392.1 million in Q1 2021.