Rating Release
Agusto & Co. hereby affirms the “A-” rating assigned to Flour Mills of Nigeria PLC
The rating expires on 30 September 2024.
Agusto & Co. hereby affirms the “A-” rating assigned to Flour Mills of Nigeria PLC (“Flour Mills”, “FMN” or “the Company”). The rating reflects the relative stability in the Company’s earnings despite industry-wide challenges of higher foreign exchange losses and rising interest costs during the year. The rating also takes into consideration FMN’s leading position in the domestic flour milling market and the potential revenue and cost synergies to be derived from the proposed business integration with Honeywell Flour Mill PLC (“HFMP”). The rating is however constrained by sustained inventory investments and prepayments relating to unsettled foreign currency (forex) forward contracts, which have continued to weigh on the Company’s cash flow and working capital positions, as well as concerns over its elevated debt profile and interest burden. Should the Central Bank of Nigeria (CBN) settle the overdue forex forward contracts at the pre-unification exchange rate, we believe that this currency hedging decision could represent a significant upside scenario for FMN.
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.
