Honeywell Flour Mills Moves to Cut Financing Costs and Enhance Profitability

Honeywell Flour Mills Plc (HFMP) has resorted to borrowings from development banks at lower interest rates as part of efforts to reduce its financing costs. The company released its audited financial results for the year ended March 31, 2018 last week, showing a jump of 64 per cent in financing cost.

Providing further clarification, the company explained that the increase in financing cost was largely due to the increase in interest rates on loans from commercial banks. And in order to manage the cost of borrowing, the company said it was able to structure a significant portion of the business financing through development banks at concessionary interest rates.

According to the Managing Director of HMFP, Mr. Lanre Jaiyeola, the benefit of this impacted the bottom line in the second half of the financial year and this benefit is expected to continue in the new financial year.

Commenting on the results, he said: “We started the year with a very strong momentum across our company and executed an aggressive market share recovery drive resulting in the 34 per cent top line growth being reported today. We saw very strong demand for our portfolio of brands even though the consumers’ purchasing power is yet to return to prerecession levels. We remain steadfast in our commitment to ensure affordability and availability of nutritious food in Nigeria and we assure our shareholders of sustainable profitable returns in the future.”

HFMP’s revenue increased by 34 to N71.5 billion in 2018, compared with N53.2 billion recorded in the comparable prior year period. According to the company, given the increase in production activities and higher energy costs due to major disruptions in gas supplies, cost of sales grew by 37 to N55.4 billion.

Selling and distribution costs grew in line with increased volumes and reflected the increased costs associated with transporting finished goods out of its plant at the Tin Can-Island Port, Apapa where there has been a constant traffic gridlock for months as the federal government and several stakeholders embarked on palliative measures to fix the roads.

Financing cost jumped by 64 per cent from N2.792 billion to N4.605 billion. As a result , profit before tax stood at N5.469 billion, compared with N4.872 billion, while it grew by three per cent from N4.305 billion to N4.427 billion. The board has recommended a dividend of N476 million, which is six kobo per share and the same paid last year.