Honeywell Flour records earnings increase
Honeywell Flour Mills Plc. (HFMP) has released its first quarter un-audited results for the period ended June 2011. The foremost flour miller experienced a challenging first quarter, characterised by rising global prices of agricultural commodities; increasing freight and energy costs; and naira depreciation.
Despite the tough operating environment, revenue for the quarter was up 2% to N9.31 billion, over the revenue of N9.16 billion recorded in the corresponding quarter in 2010. Sales of the company’s bread flour, semolina and whole wheat maintained strong performance. Honeywell Superfine flour accounted for the bulk of earnings, while sales of Honeywell Semolina grew by 9% during the quarter, Honeywell Wheat Meal maintained its distant number one position in the market. Honeywell pasta and Honeywell noodles from the Company’s wholly owned subsidiary, Honeywell Superfine Foods Limited, accounted for 21% of total product sales in the quarter compared to the 20% contribution in the same period in 2010.
The Company also grew its total assets by 14% from N31.1 billion as at 30 June 2010 to N35.3 billion as at 30 June 2011 while it grew fixed assets by 10% from N12.6 billion to N13.9 billion within the same periods.
However, Profit Before Tax (PBT) and Profit After Tax (PAT) both declined by 82% when compared to the performance of the equivalent quarter in 2010. PBT dropped from N881 million to N162 million while PAT fell from N503 million to N91 million.Management is of the opinion that the next quarter resultswill reflect an improvement over the first quarter results.
The marginal growth in turnover was due to slow trading experienced during the election season and the heavy rains and constant traffic congestion in Apapa, where the factory is located. This made it very difficult for customers, delivery trucks and even staff to access the factory in a time efficient manner.
Honeywell Flour Mills Plc. produces the finest flour and flour based products using the best grade of wheat: Hard Red Winter (HRW) Wheat, imported from the United States. The cost of wheat represents about 90% of the inputs required for the production of flour. Global wheat prices rose steeply during the quarter and traded at over 60% above prices in the comparative quarter of year 2010. Flour prices could not keep pace with increase in wheat prices.
Honeywell, with its1,610MT/day milling capacity already operates at high efficiency levels and enjoys 12% market share in the, flour milling industry. It is now set to increase this capacity in the coming months.
The Company is currently investing over N10 billion (about $65 million) in a state-of-the art twin mill facility, at its current site, with combined capacity of 1,000MT/day to enable it meet growing demand for its range of products.
The first of the twin mills is expected to go into production by May2012 and the second by September 2012.
The new mills will allow the Company skew production capacity to higher margin products such as Honeywell Wheat Meal and Honeywell Semolina so as to be able to create further downstream activities and additional capacity for earnings growth and reduce volatility. This strategic move will enhance the Company’s ability to react to the volatility of input costs, especially wheat, by better matching product prices to fluctuating input costs. This is a continuation of the Company’s product diversification strategy that started with the expansion into Noodles and Pasta through HFMP’s wholly owned subsidiary, Honeywell Superfine Foods Plc.
The Company recently released its March 2011 Financial Year End results posting a 112% increase in PAT and beating analysts’ forecasts. Its year end revenue was N34.05 billion.
Honeywell Flour Mills Plc is a market leader in flour and wheat based products. HFMP has a reputation amongst bakers for milling the best quality flour in the country. It is listed on the Nigerian Stock Exchange and is a member of the Honeywell Group of Companies founded by Dr. Oba Otudeko, former President of the Nigerian Stock Exchange