Flour Mills of Nigeria Plc was one of the worst performing stocks last week, shedding 12.10% to close at N13.80.
Year to date, the stock is down 40.26%, underperforming the Nigerian Stock Exchange All Share Index which is down 1.75% year to date.
The stock is also trading at levels last seen in almost a decade. The stock last traded at these levels in July 2009.
Why is the share price tanking? :The drop in the company’s share price can be attributed to two reasons: general market sentiments which have been poor, and the company’s poor results.
Save for a brief rally following the listing of MTN Nigeria, the All Share Index was down close to 8% and was one of the worst performing frontier markets year to date.
Investor apathy, driven by unclear economic direction, has left many of them staying on the sidelines.
Poor results:The company’s nine months results also show a decline in both topline and bottom line. Revenue fell by 6.3% from N427 billion in 2018 to N400 billion in 2019. Profit fell much more sharply. Profit before tax fell by 42.5% from N19.5 billion in 2018 to N11.2 billion in 2019. Profit after tax also fell from N13.2 billion in 2018 to N7.8 billion in 2019, down 40.9%
The company had attributed the drop in revenue to logistic challenges at the Apapa ports. From all indications, the company would thus fall short of the N13 billion in profit after tax it made in its last financial year.
Will it fall further ?: Upward or downward movement are dependent on two factors: general market sentiments and the company’s full year results which are usually out sometime in July.
If market sentiments are positive, the stock could witness a rebound. If the market continues to decline, the stock could drop to new lows.
About the company: Flour Mills of Nigeria Plc was incorporated on September 29, 1960, as a private limited liability company and converted to a public company in November 1978.
The company’s operations are divided into four value chains: food value chain, sugar value chain, agro allied value chain and support services.