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Shunning performance, investors in Dangote Flour has consistently mounted buy pressure on the company’s stock, which has seen stock price maintain an 11-day upward spree on the Nigerian Stock Exchange (NSE).
This has seen price of the company rally to its all-time high as of close of trading on Tuesday, with share price closing at N18.80 after rising 9.94 percent in the early hours of trade from N17.10.
This is despite a declining performance in the company’s bottom line as shown in its recently released Q1 2019 result.
According to financials released by Dangote Flour on the NSE for the period ended Q1 2019, numbers show a loss after tax of N2.89 billion from a profit of N1.58 billion recorded in Q1 2018.
Analysts believe the reaction is on the back of information towards the acquisition of Nigeria’s third largest miller by market capacity, by Olam, a Singaporean company.
Gbolahan Ologunro, “investors’ interest in the stock is due to the offer by Olam to acquire the outstanding shares of Dangote Flour.”
The acquisition by Olam will possibly increase resultant company’s market share to a potential 43 percent overtaking Flour Mill of Nigeria (FMN) with a market share of 32 percent.
Analysis of company’s financials shows that the decline by 283 percent in Dangote Flour’s bottom line was a resultant effect of a sharp decline by 13 percent in revenue and growth by 6 percent in cost of sales, pulling down significantly gross profit by 99 percent to N51.8 million in Q1 2019.
Since the acquisition of Tiger Brand Consumer Goods plc by Dangote Flour in 2016, data collated have shown a year-on-year average decline in revenue by 11 percent in the first quarters in the last 3 years.
Meanwhile, cost of sales during the last … Read More...