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 September 2025.
Agusto & Co. hereby affirms the “A-” rating assigned to Flour Mills of Nigeria PLC (“Flour Mills”, “FMN” or “the Company”) as it continues to demonstrate good financial health and resilience in the face of adverse economic conditions. This is evidenced by the Company’s prudent foreign exchange management strategies, which have helped to minimise financial shocks to its earnings and shareholders’ funds in the aftermath of the Central Bank of Nigeria’s (CBN) decision to float the naira. The rating also considers FMN’s strong market position and ability to pass on rising costs to consumers as well as the potential operational efficiency and tax savings to be derived from the ongoing corporate restructuring. The rating is however constrained by sustained inventory investments, prepayments for letters of credit (LCs) and the “disputed” CBN forward contracts, which have continued to weigh on the Company’s cash flow and working capital positions, as well as its elevated debt profile. However, we believe that the continuous revaluation of its foreign exchange obligations using a blended rate (sourcing rate), which is higher than the official rate, and the eventual redemption of the “disputed” CBN forward claims of ₦43.7 billion (valued at the purchasing rate of less than ₦650/$), present significant upside to FMN’s overall financial stability.
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 offers various wheat-based foods under its Golden Penny brand. FMN also provides packaging and logistics solutions under the BAGCO and Golden Transport brands. Flour Mills of Nigeria PLC has been actively restructuring its operations to enhance efficiency and streamline its business. During the year under review, FMN transferred its power assets to its power subsidiary, Golden Penny Power Limited, while also registering entities within free trade zones to leverage the tax incentives and simplified customs procedures offered by these zones. In May 2024, FMN’s packaging division, BAGCO, was restructured to operate as a separate entity under the name BAGCO Industrial Solutions Limited. Based on these restructuring, the food (Golden Penny) and logistics (Golden Transport) segments are the two main business lines directly under the purview of Flour Mills as a standalone entity.
