Northern Nigeria Flour Mills Plc (NNFM) has seen a substantial drop in the profit it generates from its revenue.
The company’s 9-month results for the period ending December 2025 reveal a decline in gross profit, operating margins, and a loss after tax; marking the worst performance in five years.
Despite earning N18.38 billion in revenue, NNFM was only able to retain N1.33 billion as gross profit, N84 million as operating profit, and a loss of N144 million after tax.
These results have left analysts questioning the company’s ability to regain its footing and whether it will be able to maintain its consistent dividend payments.
For the past five years, NNFM has been a reliable player in the Nigerian stock market, consistently paying dividends to its shareholders.
From N0.15 per share in 2021 to a high of N0.50 per share in 2024, investors have enjoyed steady returns.
However, the company now appears to be facing a tough challenge, and it seems unlikely to pay any dividends in 2026.
So, what’s going wrong?
The struggles at NNFM
NNFM’s 9-month results ending December 31, 2025, tell a story of a company that is struggling to maintain its footing.
- Revenue has fallen by almost half compared to the same period in 2025, indicating that the company is selling far less than before.
- On top of this, costs remain high, particularly the cost of raw materials like wheat and maize, which NNFM uses to produce flour and semovita.
- These increased costs have squeezed their profits, leaving little room to cover the basic expenses, let alone pay a dividend.
The impact of rising costs
The major issue facing NNFM in 2026 is the high cost of sales. In the first nine months of the 2026 financial year (ending December 2025), gross profit dropped to just N1.33 billion, marking a 65% decrease from the same period last year.
- The gross profit margin collapsed to just 7%, compared to 13% in 9M 2025. This means that direct costs, primarily material costs, consumed about 93% of revenue for the worst ratio in five years, and a situation that may be unsustainable.
With this direct cost-to-revenue ratio, NNFM had very little left to cover its operating expenses, leading to an operating profit of just N84 million, down from over N4 billion in the same period last year.
- This has contracted the operating margin to 0.46%, the lowest in five years. Clearly, the company is struggling to retain profit from its sales.
Management response: Can they turn things around?
Management has stated that they are working hard to turn the situation around, focusing on cutting operational costs and improving sales.
However, given the serious challenges NNFM faces with its high cost of sales and shrinking margins, how effective these efforts will be remains uncertain.
Investors will have to wait and see how NNFM navigates these hurdles.
One possible starting point for improvement could be disclosing further details about the components of its material costs.
For material costs to consume over 85% of revenue requires further scrutiny, and investors may expect more transparency in this area.
NNFM is heavily influenced by its parent company, Golden Penny Food Ltd (formerly Flour Mills of Nigeria Plc), which holds 59.6% of the company’s equity, which was recently delisted from the NGX.
Its ultimate controlling parent is Excelsior Africa Investments Limited; a company registered in Liberia. The beneficial owner of Excelsior Africa is a trust set up by the late John S. Coumantaros.
While NNFM’s parent company and ultimate parent hold substantial control over its operations, this complex ownership structure might be contributing to strategic decisions that prioritize the interests of the larger group, potentially sidelining NNFM’s specific needs.
Bottom line
The 9-month results paint a picture of a company going through a difficult phase, with rising costs, shrinking margins, and a significant decline in profitability.
This may make 2026 the worst year for NNFM in the last five years, and as a result, the likelihood of NNFM paying a dividend in 2026 seems very low.
Investors will need to carefully monitor how NNFM addresses these challenges moving forward.
However, there is a silver lining: strong cash flow from operating activities. The company’s cash flow management appears to be improving, which could provide some much-needed liquidity to weather this difficult period.
Despite the financial challenges, NNFM’s share price this year has remained flat year-to-date (YtD), following an impressive 92% YtD gain in 2025.
The company still has a market capitalization of N15 billion, nearly double its net assets of N9 billion, which suggests that while it’s struggling now, the market still sees potential for recovery.
