By Emeka Anaeto

FLOUR Mills of Nigeria Plc, FMN, has just conveyed mixed signals to the investors in its last nine-months – the third quarter 2016/17, (Q3’16/17) financial results as at December 31, 2016.

While the top-line seems to have defiled recessionary economic environment as it still shows robust growth, the bottom line turned out disappointing on Year-on-Year, YoY, basis.

On the top-line, revenue surged 47.9 per cent to N389.9 billion from N263.7 billion in the corresponding period 2015/16, surpassing analysts’ forecast.

Massive surge in gross profit

Though Cost of Sales at N336.4 billion, had risen sharply by 42.6 per cent, Gross Profit had equally surged massively by 93 per cent to N53.5 billion from N27.7 billion.

From L-R: Paul Gbededo, CEO, Flour Mills & •John Coumantaros, Chairman, Flour Mills

However, the massive surge in Gross Profit could not help the bottom-line from base effect. This also came along with a huge 270 per cent jump in tax burden. Consequently, pre-tax profit slumped – 48 per cent to N10.3 billion while post-tax profit slumped – 61 per cent to N7.4 billion.

The net operating loss figure of N11.8 billion was recorded against a 2015/16 net operating profit of N23.7 billion.

But largely the bottom line decline was due to the base effect of the significant profit recorded in 2015/16 from sale of the company’s investments in UNICEM, Calabar.

Gross margin expanded by 320 basis points to 13.7 per cent from 10.5 per cent in Q3’16/17 following a much slower rise in production costs. The company however reported a 61.1 per cent year-on-year, YoY, decline in earnings.

On a quarterly basis, Q3’16/17 revenue declined modestly by 1.1 per cent to  N134.6 billion while gross margin contracted by 290 basis points to 12.7 per cent from 15.6 per cent in Q2’16/17.

Amalysts have noted that although exchange losses on the company’s foreign currency loans were much lower at  N3.7 billion (Q2’16/17:  N7.8 billion), the company reported a 54.6 per cent QoQ decline in earnings to  N932.5 million.