Honeywell Flour Mills Grows Profit by 112%
Honeywell Flour Mills Plc, a member of the Honeywell Group has released its audited financial results for the year ended 31st March 2011 showing a 112 percent growth in profit after taxation to N2.5 billion, from N1.2 billion for the previous financial period.
Though the company’s sales witnessed a marginal two percent growth from N33.5 billion to N34.1 billion, improvement in operational efficiencies saw the companies profit margins rise to 7.3 percent from 3.5 percent.
The improvements in efficiencies is seen in a drop in administrative expenses by 9 percent, whilst interest expenses dropped by 28 percent during the financial period under review. Improved treasury and working capital management also ensured that the company’s interest income grew from N213 million to N769 million, representing an increase of 260 percent.
Capital market analysts note that these results give credence to the corporate vision, stability and long term viability of the company, which had a very successful initial public offer of its shares in 2008 amid the then gloomy outlook of the local and international financial markets. “Doing manufacturing business and posting this kind of positive result within our tough operating climate is a clear signal of better days ahead for the company,” a leading stockbroker who preferred to remain anonymous said. “It has not been as easy time for manufacturing companies generally.”
Notwithstanding the vagaries of the economy, Honeywell Flour Mills plc is boosting its production capacity with a US$50 million (N7.8 billion) investment in its Tin Can Island, Apapa facility. This investment will see an additional ultra-modern plant being installed and possibly commissioned by 2012, giving the factory an additional milling capacity of 1000 metric tonnes per day.
Honeywell Flour Mills Plc is currently considered to have the highest utilisation rate in the industry of about 83.4 percent. Average capacity utilization in the Nigerian manufacturing sector stands at 43 percent. The additional capacity will be used to drive sales in higher margin products such as Honeywell Pasta, Noodles, Semolina and Wheat Meal as well as other products for which the company is currently unable to fully satisfy demand.
The company has continued to strengthen its balance sheet by reducing net debt. Long term borrowing was reduced by 42 percent from N2.37 billion to N1.36 billion, while short term borrowings were reduced by 18 percent from N13.39 billion to N11.01 billion.
Management of the company has also increased its dividend to current shareholders by 18 percent compared to 2010. This reflects a dividend payout ratio of 41 percent in the current year, from 74 percent in 2010. This decision was explained by the company’s management as a prudent treasury management measure designed to ensure that essential investment in additional capacity is partially financed internally, thus reducing the need for higher debt levels. This allows the company to strengthen the balance sheet, making essential investment, which will ultimately improve the company’s long term growth prospects. The dividend of 13 Kobo per share represents a dividend yield of 3 percent which is at par with yields in the fast moving consumer goods (FMCG) sector.
Honeywell Flour Mills Plc has also made very recent enhancements to its corporate governance. It has announced the appointment of Mr Jens Mollenbach, a former Managing Director of Fan Milk Plc and R.T. Briscoe as an independent non-executive director. Mr. Mollenbach, a Danish national, is a seasoned professional with over 30 years of board level experience. He is considered to have particular manufacturing and food expertise. Mr. Mollenbach graduated in 1972 from Copenhagen University with a Masters’ degree in Economics. He has attended numerous international courses, including the Programme for Management Development at the Harvard Business School, Boston, United States in 1981.