Honeywell Holds AGM, Posts N1.4 Billion Profit for 2015

Honeywell Flour Mills Plc, a market leader in the Nigerian food industry, is set to hold its 6th Annual General Meeting (AGM) on  September 29 for the financial year ended March 31, 2015. Speaking ahead of the AGM, the Chairman of the company, Dr. Oba Otudeko, said

‘’With the successful conclusion of the 2015 elections and the smooth transition to a new Government at Federal and State levels, the political climate has become more stable. The prospect for growth and better performance for our Company in the new Financial Year is bright. We are optimistic that our performance will improve beyond the level achieved in the financial year ended March 2015. We are driven by our vision to become the most admired African Company, operating across the food value chain from farm to fork. We believe that the abundant natural resources in Nigeria as well as the huge and growing population give us an advantage for the achievement of our vision. The future of our Company is indeed very bright as we are poised to reap the benefits of the investments we are currently undertaking. As we continue to position our business to deliver returns to our shareholders, we have also taken strategic measures to enhance our competitive advantage and sustainable business success’’ 

A review of the financial result for the year ended March 2015 shows that despite the numerous economic and infrastructural challenges in the accounting year, Honeywell Flour still made profit. Revenue, however, declined by 10.94 percent, from N55.08 billion to N49.06 billion in the corresponding period of 2014. This was due largely to the effect of the continuing insurgency in the North-Eastern part of the country which increased precipitously in the last two quarters of the company’s financial year and continued to affect the company’s ability to effectively distribute its products in the affected region.

Rise in Operating Expenses

For the year ended March 2015, selling and distribution expenses increased by 6 percent from N3.47 billion to N3.69 billion in the corresponding period of 2014 while administrative expenses increased slightly by 3.42 percent from N1.79 billion to N1.86 billion over the period. According to the company’s management, the increasing costs are a direct reflection of the company’s efforts to strengthen its operations in a tough business environment so as to achieve sustained growth.

The expenses also include the cost of further deepening the company’s market share and client base through increased branding and sales promotion activities as a means of reaching out to customers nationwide. Therefore, due to the increase in total operating expenses, operating profit fell from N5.44 billion in March 2014 to N2.18 billion in March 2015, reflecting a 59.81 percent change.

Weathering the Storm

Despite the daunting challenges pervading the operating environment, the company remained resolute in its goal to continually deliver products that offer superior value to customers. It is clear that the company’s ability to meet this commitment to its customers is inextricably linked to her aspiration to deliver increased shareholder value.

While the company was able to protect its market share in most categories, the weakening of the naira against the US dollar led to significant increase in the cost of foreign inputs especially wheat and engineering spares. It also caused a significant foreign exchange loss which further eroded its profit margins. These factors led to a decline in profit before Tax (PBT) to N1.43 billion.

Total Assets rose by 6 per cent to N67.94 billion from N63.83 billion reported in 2014. Asset growth in the review period was largely driven by on-going capacity expansion projects.

The company’s resolve to continue to appreciate and reward its shareholders on a yearly basis remains unwavering in spite of the challenging results. In line with this objective, the Board of Directors has recommended a total dividend pay-out of N396,509,883, representing a distribution of 5 kobo for every 50 kobo ordinary share held.

Growing Amidst Economic Challenges

In an industry where production capacity matters, Honeywell has invested considerably in expanding its production capacity. The 22 milling plants in Nigeria are owned by 11 companies; of these 11, four have a combined installed capacity of 25,000 MT daily and control over 75 percent of the market. Since 1998 when it’s production capacity was at a modest 200 MT daily, the company has invested considerably in CAPEX and now has a combined installed capacity of 2,610MT daily in 6 different mills at its main factory location in Tincan Island Port, Apapa, Lagos.

Having recognized that competition is continuously on the rise in the flour milling and noodles and pasta industry, the management of Honeywell Flour Mills Plc has responded through large investments in capacity upgrade and expansion.

The Chairman of the company revealed that there is a plan on ground now to commission the third power plant, which is 98 percent ready and the organization has so far spent about N1.0 billion on the project. He said,

"This is a plan we have over the next 18 months; because Pasta products lend themselves to a lot of consumer marketing, Honeywell wants to take the product outside the country and all-across Africa. And to some extent, this is already happening due to the free movement of goods and people, but we want to actively promote this so that we can spread the value of our brands beyond the shores of Nigeria"