Rating Release
Agusto & Co hereby assigns an indicative “A-” rating to Flour Mills of Nigeria Plc up to ₦40 Billion Bond
The rating expires on 31 December 2023.
Agusto & Co hereby assigns an indicative “A-” rating to Flour Mills of Nigeria Plc (“Flour Mills”, “FMN”, “the Issuer” or “the Company”) up to ₦40 billion Three-Year Fixed Rate Senior Unsecured Bond Due 2026 (“Series 1 Bond”, “the Bond” or “the Issue”) under the ₦200 billion Bond Issuance Programme. The rating underscores the Issuer’s good capacity to meet payment obligations on local currency debts evidenced by its healthy earnings and cash flows despite daunting business challenges. The rating also considers FMN’s strong market position within the domestic flour milling space as well as the potential synergy to be derived from the recent acquisition of a majority stake in Honeywell Flour Mills Plc (“Honeywell” or “HFMP”). However, the rating is constrained by concerns over the Company’s declining margins amid severe cost pressures and the continuous vulnerability of its future earnings to macroeconomic headwinds considering 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. To further deepen its market reach, FMN acquired a 76.75% majority stake in Honeywell – the third-largest flour miller in Nigeria. We expect the operational synergy to be derived from the recent acquisition of a majority stake in HFMP to result in increased earnings, better cash flows and greater market share 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.
