Honeywell Flour Mills, one of Nigeria’s major flour milling companies, reported its financial year-end audited accounts, stating that it posted a loss of N8.5 billion, marking its third consecutive year of reporting pre-tax losses.
Rival Flour Mills Plc acquired 85% of the company in a N28 billion deal in 2022, gaining 85% control of the company’s equity. Flour Mills paid N4.2 per share for Honeywell.
However, since then, Honeywell has struggled to post profits due to a combination of macroeconomic challenges such as higher inflation, exchange rate depreciation, and weak economic growth. In 2022, it reported a pre-tax loss of N172 million, and in 2023, N8.9 billion.
Despite the losses, the company reported revenue of N188.3 billion, up 27.8% from a year earlier. Operating profit also rose 500% to N28.4 billion as the company improved margins on the back of higher sales in its flour mills and pasta divisions.
Result Highlights : 2023 vs 2022
- Revenue: N188.3 billion vs N147.4 billion, +27.7% YoY
- Gross profit: N32.3 billion vs N9.5 billion, +239.5% YoY
- Operating profit: N28.4 billion vs N5.0 billion, +464.3% YoY
- Finance costs: N36.3 billion vs N14.2 billion, +155.8% YoY
- Loss before taxation: N8.6 billion vs N9.5 billion, -9.8% YoY
- Income tax (expense)/credit: N1.5 billion vs N9.8 billion, -84.5% YoY
- (Loss)/profit for the year: (N10.1 billion) vs N256.1 million, -4051.5% YoY
- Basic (loss)/earnings per share (kobo): (127.61) vs 3.23, -4051.5% YoY
- Total Assets: N149.0 billion vs N165.0 billion, -9.7% YoY
- Total Assets: N149.0 billion vs N165.0 billion, -9.7% YoY
- Retained (loss)/earnings: (N7.0 billion) vs N3.2 billion, -318.9% YoY
Commentary
A cursory analysis of the financial statements indicates Honeywell’s revenue increased by 27.8% from N147.4 billion in 2023 to N188.3 billion in 2024.
- This was largely due to an impressive growth in its flour mills and pasta division both of which rose from N119.2 billion and N28 billion to N145.8 billion and N42.4 billion respectively.
- Despite the surge in revenue, the company curtailed growth in operating expenses despite rising from N5.8 billion to N6 billion.
- A major factor contributing to the loss was the substantial increase in finance costs, which surged to N36.3 billion from N14.2 billion in 2023.
- This increase was driven primarily by foreign exchange losses amounting to N25 billion, reflecting the company’s exposure to foreign currency risks. The significant devaluation of the Naira likely exacerbated these losses, impacting the overall financial health of the company.
- Honeywell Flour Mills’ N10.1 billion loss for the fiscal year 2024 highlights the challenging business environment and rising costs that have impacted the company.
While revenue growth shows underlying market demand, the substantial increase in finance costs and operating expenses emphasizes the need for strategic financial management and cost optimization.
Honeywell Flour Mills closed the month of May with a share price of N3 and is down 9.6% year to date. Flour Mills closed at N38 per share and is up 14.9% year to date.