BusinessDay 13 April 2018

Friday 13 April 2018
C002D5556
BUSINESS DAY
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BD
Markets + Finance
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Dangote Flour Mills enhances value
of investment as earnings spike
BALA AUGIE
Historical Background
Dangote Flour
Mills Plc commenced
penetrations
in
1999, as a division
of fastest growing conglomerates.
Following 8the
strategic decision of Dangote
Industries Limited to unbundle
its various operators,
whereas Dangote Flour Mills
Plc was incorporated in 2003.
The rethinking was completed
in January 2006 when
the Federal High Court sanctioned
a scheme of arrangement
where in all the assets,
liabilities and undertakings
of the erstwhile flour division
of Dangote Industries was
transferred to Dangote Flour
MillsPlc .
From an installed capacity
of 500 metric tonnes
per day, at its Apapa mill,
the company has expanded
rapidly by opening in quick
successions, three flour mills
in Kano, Calabar and Ilorin.
The Apapa Mill in Lagos,
was commissioned in September
1999, while the Kano
Mill in June 2001. The Calabar
Flour Mill was commissioned
in July2002.
The company currently
has twelve million shares
valued at N12.0 billion, with a
fully paid up capital of N2.50
billion while total shareholders’
fund stood at N37.45
billion as at December 2017.
The mills are ideally located
for the servicing of
the various and diverse geographical
markets, with the
Lagos (Apapa) and the Calabar
located within ports for
easy facilitation of wheat
imports through state-of-art
ship off- loading equipment .
The company recently
released its audited results for
the year ended December 31,
2017; showing in created revenue
when compared with
the corresponding period of
2016. There was an increase
in gross profit, which means
the company has effectively
managed direct costs attributable
to projects.
Dangote Flour Mills has
been recording stellar performance
after re-acquiring the
company from South Africa
consumer goods giant, Tiger
Brand Plc. Capital injection
Aliko Dangote
from the owner of the business
help spur the consumer
goods giant to growth.
With this impressive performance,
investors should
expect to make good returns
from Dangote Flour Mills.
Increase in gross profit
bouye by revenue growth
The company recorded
an increase of 18.60 percent
in revenue to N125.44 billion
in December 2017 from
N105.70 billion as at December
2016; driven by 31.97
percent increase in revenue
from flour to N107.81 billion.
The growth at the top
line can also be attributed
to the company’s marketing
and distribution strategies
and its ability to harness the
resources at its disposal.
Cost of sales was up 18.31
percent to N96.01 billion
in the period under review
from N81.15 billion as at
December 2016. The higher
production costs were due to
volatility in the price of wheat
at the international market,
surging energy costs and the
devaluation of the currency.
Gross profit increased by
9.20 percent to 29.43 percent
to N29.46 billon in the period
under review from N26.93
billion the previous year. In
other words, the company is
efficient in managing direct
costs attributable to projects.
Increase in profits,
thanks to gains from sale
of assets
For the year ended December
2017, profit before tax
increased by 17.80 percent to
N22.43 billion from N19.04
billion the previous year.
The company realised
N3.56 billion from the sale of
assets, which helped underpin
pre-tax profit.
Profit after tax spiked by
43.16 percent to N15.12 billion
in December 2017 from
N10.56 billion the previous
year. Distribution and administrative
expenses were
up 28.73 percent to N12.05
billion in the period under
review from N9.36 billion the
previous year.
Finance costs were up
1.42 percent to N2.84 billion
in December 2017 from
N2.80 billion as at December
2016. Short term borrowings
declined by 79.04 percent to
N544.90 million in December
2017 from N2.60 billion as at
December 2016.
Times interest coverage
ratio stood at 15.33 times
of operating profit, which
means the consumer goods
giant can pay interest expense.
Inventories surged
by 162.89 percent to N28.34
billion in the period under
review as against N10.78
billion as at December 2016.
Trade and other receivables
reduced slightly by
4.20 percent to N9 billion
in the period under review
from N9.40 billion the previous
year.
Trade and other payable
increased slightly by 3.34
percent to N16.78 billion in
December 2017 from N16.24
billion as at December 2016.
Total borrowings were up
92.16 percent to N69.62 billion
in December 2017 from
N36.23 billion the previous
year. DFM has turned each
of invested cash in sales in
generating higher profit as
net profit margins increased
to 12.11 percent in December
2017 from 11.61 percent as at
December 2016.
Dangote Flour Mills, others
donate N70m threshers
to wheat farmers
Dangote Flour Mills and
other flour millers donated
50 units of multi-crop
thresher machine worth N70
million to wheat farmers to
underpin Nigeria’s self-sufficiency
in wheat production.
Thabo Mabe, Managing
Director and Chief Executive
Director of Dangote Flour
Mills of Nigeria, made the
disclosure at the presentation
of the equipment in
Lagos.
Mabe said that the new
machine will help reduce
costs and improve yields,
hence increasing the amount
of yields farmers get per hectare
of land. He added that the
yields will go up and costs will
come down.
“We are working assiduously
to ensure that Nigeria
attains self-sufficiency
in wheat production. Our
company has bought about
3000 tonnes of wheat from
local farmers. We need to
make sure that we get local
wheat for bread spaghetti and
bread,” said Mabe.
John Coumantaros,
the Chairman, Flour Milling
Association of Nigeria
(FMAN), represented
by Paul Gbededo, Group
Managing Director, Flour
Mills Nigeria Ltd., said
that the presentation was
a demonstration of the association’s
commitment
to continuously support
wheat farmers and Federal
Government’s agriculture
promotion agenda.
“There is no gainsaying
that self-sufficiency in
the production of wheat
in Nigeria will have an unprecedented
impact on the
Nigerian economy through
attainment of food security,
poverty reduction and of
course, save much needed
foreign exchange,” he said.
Coumantaros said that the
association signed an MoU
with Wheat Farmers Association
of Nigeria in 2016 to
purchase all available wheat
grain produced by farmers
in line with agreed quality
parameters and prevailing
market prices.
“In 2017, FMAN fulfilled
its promise by purchasing
over 2,400 metric tons of
wheat valued at N469 million.
“In 2018, even before
the start of harvest, we have
purchased over 1600 metric
tons of wheat valued at N237
million.
BD MARKETS + FINANCE (Business Team lead: PATRICK ATUANYA - Analysts: BALA AUGIE and LOLADE AKINMURELE)