Flour Mill hits a decade low at N13.75 as investors show apathy

Flour Mill hits a decade low at N13.75 as investors show apathy

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Shares of Flour Mill of Nigeria Plc (FMN) tumbled to its lowest level at N13.75 since July 2009 on Monday, depressed by sell pressure as investors show disinterest in the stock.

FMN’s bearish streak began late-March this year, and shed 0.36 percent after Monday’s trading, down 68 percent since the year-to-date.

The miller underperforms the benchmark index and consumer goods index that have returned negative 3.9 percent and 16.2 percent respectively so far in the current year.

Investors’ apathy toward the stock is driven by weak market sentiments and unimpressive earnings scorecards of the firm.

General sentiment towards equity market is weak as investors are yet to see economic-stimulating policies that would resuscitate the bourse.

Analysts maintained that the slow growth of wider economy and absence of key reforms that centers on unifying the multiple exchange rate system, developing infrastructures, lowering cost of credit, wanes investors’ confidence towards the equity market.

Logistic turbulences posed by Apapa gridlock, decrepit infrastructure and harsh operating conditions continue to torture the miller reflective in its latest financial scorecards.

A snapshot of its earnings figure revealed that the food products maker’s top-line shed 6 percent to N400.6 billion in the first nine months of 2018, relative to N427.5 billion realized in the previous corresponding period.

This in addition with elevated operational expenses adversely affected bottom-line as net income dipped nearly by half to N7.9 billion.

Consequently, profit margin of the agro-allied player slowed to 1.97 percent in the review period, 1.12 percentage points lower than 3.08 percent a year before.

This implies that FMN retained N20 as profit from every thousand naira generated as revenue, relative to N31 one year back.

However, given the presidency’s directive towards clearing the country’s premier port city, Apapa, the firm might possibly see improvement in top and bottom-line in 2019.

FMN announced plans three months ago to transfer existing assets in Golden Penny Fertilizer to its sole agro-allied segment, Golden Fertilizer Company Limited to boost efficiency and market expansion.

The move was approved at a court-ordered dated February 20, 2019.

FMN trades at a price-to-book ratio of 0.39x, compared with Dangote flour (2.6x) and Northern Nigerian Flour Mill (0.76x), implying that the stock is currently undervalued.

The company offers flour, noodles, pastas, oil & spreads, and sugar, as well as feeds, fertilizers, and logistics and support services.


Israel Odubola

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