Agusto & Co. assigns “Bbb” rating to Flour Mills of Nigeria Plc.
This rating expires 30 September 2020.
The rating assigned to Flour Mills of Nigeria Plc. (“Flour Mills”, “FMN” or “the Company”) reflects the fragile macroeconomic climate which has moderated consumer spending and elevated input costs as well as the Company’s inadequate working capital and declining margins across FMN’s core business. We note that Flour Mills’ profitability in the year ended 31 March 2019 was bolstered by dividend income earned from its subsidiary which we believe is unsustainable. Notwithstanding, the rating reflects the Company’s moderate leverage as well as its stable and experienced management team. Agusto & Co. has taken into cognisance FMN’s market leadership in the flour milling industry, diversified product portfolio, extensive distribution channels, strong brands in the Nigerian fast-moving consumer goods (FMCG) sector as well as significant investment in backward integration programmes.
Flour Mills’ is the largest publicly listed food business by revenue on the Nigerian Stock Exchange and has strong manufacturing capabilities, with a milling capacity of 2.9 million metric tonnes per annum. Over the last decade, FMN has invested in a number of backward integration initiatives in the agro-allied space which has begun to yield notable gains. Following the Company’s investment in other agro-allied business including sugar plantation and manufacturing, Golden Sugar Company Limited (100% owned subsidiary in sugar business) accounted for the bulk of FMN’s investment income in the period under review.
The opinions expressed in this rating release do not represent investment or other advice and should therefore not be construed as such. Visit www.agusto.com for further information.
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This Rating Release is transmitted to you for the sole purpose of dissemination through your newspaper / magazine / agency. The rating release may be used by you in full or in part without changing the meaning or context thereof but with due credit to Agusto & Co.