Rating Release
Agusto & Co. hereby affirms the “A-” rating assigned to Flour Mills of Nigeria Plc with a stable outlook
The rating expires on 30-09-23
Agusto & Co. hereby affirms the “A-” rating assigned to Flour Mills of Nigeria Plc (“Flour Mills”, “FMN” or “the Company”). The rating affirmation underpins FMN’s operational resilience, which has continued to support a healthy cash flow position and satisfactory profitability level, despite soaring input costs caused by prolonged supply chain disruptions and high foreign exchange and inflation rates. This is in addition to the Company’s moderate leverage position as well as its qualified and experienced management team. The rating also takes into account FMN’s leading position in the domestic flour milling market as well as the potential synergy to be derived from the recent acquisition of a majority stake in Honeywell Flour Mill PLC (“HFMP”). However, the rating is constrained by thinning margin across the Company’s food segment owing to intensifying cost pressures and the vulnerability of its future earnings to macroeconomic headwinds given the undue exposure of its production process to external shocks and foreign exchange risks.
Flour Mills of Nigeria PLC is a fully integrated food company and a leading flour miller with an installed capacity of over 3 million metric tonnes per annum. The Company has extensive product offerings in the wheat-based food and packaging segments under the Golden Penny and BAGCO brands respectively, and a robust distribution network of wholesalers and retailers in line with its business-to-business (B2B) and business-to-consumer (B2C) sales strategies. In a bid to improve the local sourcing of raw materials and lower input costs, FMN has continued to strengthen its partnership with various farmer groups in the country. Although these partnerships have resulted in improved local sourcing of critical inputs, the Company is yet to achieve considerable scale in this regard, hence, the high dependency on imported wheat.
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.
