By MICHAEL EBOH & NKIRUKA NNOROM

Flour Mills of Nigeria Plc has blamed tough operating environment and the rising cost of production for the decline in its bottom line in its 2012 financial year.

The company had recorded a turnover of N258.268 billion in its year ended, March 31, 2012 financial statement; rising by 8.15 per cent from a turnover of N238.8 billion recorded in 20112.

Despite the increase in its turnover, the company’s profit before tax dipped by 26.73 per cent to N12.049 billion in 2012 financial year, from N16.445 billion recorded in its 2011 financial year, while its profit after tax depreciated by 11.36 per cent to N8.377 billion from N9.45 billion in 2010.

Speaking at a forum heralding its 2012 annual general meeting, in Lagos, Mr. Emmanuel Ukpabi, Group Managing Director, Flour Mills, attributed the decline in its profit to the high cost of raw materials, high cost of power generation, Federal Government’s policy on cassava and security challenges in the Northern part of the country among others.

According to him, the high cost of raw materials, especially rising cost of wheat in the international market, is eroding its profit, in addition to high diesel and gas cost.

He said, “If the Federal Government will address the country’s power situation and the company resort to the use of public power, our production cost will reduce significantly.”

Ukpabi said the recent policy of the Federal Government on cassava addition in flour production, which led to the introduction of higher tariffs on wheat importation, has posed a serious challenge to the company.

According to him, the policy has brought about an introduction of 15 per cent levy and 10 per cent duty on wheat importation, adding that a lot of facility will have to be put in place by flour millers for them to be able to effectively implement the policy.

“Another challenge inherent in the cassava policy is the acceptability of the finished products by bakers. There is the question of how many bakers will be prepared to use flour made from cassava and wheat in the production of bread,” he queried.

Ukpabi disclosed that the security challenges in the northern part of the country is seriously hampering its operations, earnings and profitability, saying that in some of its milling plants in the region, production is been impeded, arising from government’s imposition of curfews and restrictions in the areas affected by insecurity.

On the company’s future plans, Ukpabi stated that its subsidiary, Golden Penny Sugar, is set to commence operation fully and will launch its sugar products into the market before the end of the year.

He said, “Over the next few months, we would be commissioning our high tech sugar refinery powered by two natural gas-driven turbines and waste heat exchange burners, which have qualified for carbon credits under Clean Development Mechanism, CDM.”

Continuing, Ukpabi noted, “Flour Mills’ goal is to be involved at all stages of the food value chain where a profitable agro-allied platform of cultivating and processing locally produced raw materials will ensure the growth and success of our food business.

“In pursuit of our goals in the food and agro-allied businesses, we continue to explore growth opportunities through acquisitions, mergers, take-overs and other forms of business combinations in other to broaden our earnings base, create synergies and build a profitable and sustainable future.”