FLOUR MILLS OF NIGERIA PLC | FULL YEAR MARCH 2020 GROUP ... Reports 2020/Full year FY20... · • Border closure impact mainly seen in pasta with +20% volume growth versus last year

Feeding the Nation, Everyday

03 August 2020

FLOUR MILLS OF NIGERIA PLC | FULL YEAR MARCH 2020 GROUP RESULTS PRESENTATION TO INVESTORS & ANALYSTS

01______________________________________________

Operating Environment

02______________________________________________

Key Developments

03_____________________________________________

Financial Review

04______________________________________________

Segment Performance

05______________________________________________

Business Outlook

06______________________________________________

Appendix

Table of Content

FLOUR MILLS OF NIGERIA PLC | FULL YEAR GROUP RESULTS PRESENTATION TO INVESTORS & ANALYSTS

3

Operating Environment01


4

Macroeconomic Performance

Real GDP Growth Rate Inflation

▪ Inflation trended upwards during the review period, from 11.4% in March 2019 to 12.3% in March 2020.

External Reserves, Oil Production & Oil Price

▪ Crude oil production has steadily decreased throughout the review period.

▪ FGN reserves reduced to $36 billion by the end of March 2020 with import cover of about 9 months.

Exchange Rate (₦/$)

▪ NGN/USD exchange rate was quite stable at around ₦364/US$, until the effect of COVID-19 caused the price to jump to around ₦385/US$ in March 2020.

▪ GDP growth was steady throughout 2019, , but declined somewhat in Q1 2020.▪ Real GDP growth in the manufacturing sector was 0.4% in Q1 2020 (year on

year); compared to 0.8% in Q1 2019

Source: CBN, NBS, FMDQ, National Bureau of Statistics, Bloomberg

1.9%

1.5%1.8%

2.4%

2.0% 1.9%

2.3%2.6%

1.9%

Q1-18 Q2-18 Q3-18 Q4-18 Q1-19 Q2-19 Q3-19 Q4-19 Q1-20

8.0%

9.0%

10.0%

11.0%

12.0%

13.0%

14.0%

Inflation Core Inflation

- 0.50 1.00 1.50 2.00 2.50

0.0

20.0

40.0

60.0

80.0

Foreign Reserves (₦'bn) Oil Price Crude Oil Production (mb/d)

Slow recovery persists; inflation and the exchange rate inch upwards


280

330

380

Mar

-19

Ap

r-19

May

-19

Jun

-19

Jul-

19

Au

g-19

Sep

-19

Oct

-19

No

v-19

Dec

-19

Jan

-20

Feb

-20

Mar

-20

CBN Official Rate I&E Parallel

5

Key Developments02


6

Full Year Overview

FY Profit Before Tax up 72% compared to previous year

New products introduced with improved packaging to further serve our consumers and deepen the reach

Agro Allied businesses turned profitable in the year behind prior year’s investment and positioning of the business

Accelerated market penetration and strengthened partnership with our distributors and association of master bakers

New additions to the Management Team

Issued N20bn corporate bond to replace expensive short term facilities


FY Profit After Tax up 184% compared to previous year

Strong Q4 closing with 5.2b of before tax profit generated in quarter

New Products Portfolio

We continue to offer high quality and affordable products

Auntie B Pasta

• Introduced in March 2020• Part of strategy to target price

sensitive customers

Golden Penny Garri 150 g

• Introduced in September 2019• Part of strategy to target price

sensitive customers• Sales are 5% of total Garri

sales

Auntie B Semolina

• Introduced in March 2020• Part of strategy to target price

sensitive customers

Golden Penny Spread 15g

• Introduced in December 2019• Part of strategy to target price

sensitive customers• Sales are 2% of total spread

sales

Golden Penny Jollof Noodles

• Introduced in April 2019• Part of strategy to drive growth

in B2C segment • Sales are 18% of total noodles

sales

Dawavita Sorghum Flour

• Introduced in August 2019• Part of strategy to target price

sensitive customers• Sales are 1% of total flour sales


Boye OlusanyaGroup Chief Operating Officer

• Over 30 years of experience across structural engineering, IT and telecommunications industries

• Previous leadership roles: Operating Partner - Helios Investment Partners, CEO - 9mobile, Partner - GA Capital, CTO - Dangote Industries, MD - Dancom Technologies, Deputy CEO- Vee Networks, Acting CEO -ECONET Wireless

• Holds an M.Sc. in Computer Science from the University of Manchester and an M.Sc. in Environmental Civil Engineering from the University of Liverpool.

Jack CwachFlour Operations Director

• Over 30 years of international experience in agro-allied, manufacturing and grain milling businesses

• Previous leadership roles: Group COO -Interflour Group, VP - Archer Daniels Midland and MD - Jamaica Flour Mills

• Holds an M.B.A. from University of Missouri Kansas City

8

New additions to Management Team


9

Financial Review03


FY 2020 Overview

Strong financial results with 72% before tax and 184% after tax growth

573.8

527.4

FY'20 FY'19

Revenue Gross Profit Profit before Tax

65.8

53.3

FY'20 FY'19

17.5

10.2

FY'20 FY'19

Profit after Tax

11.4

4.0

FY'20 FY'19

Earnings per Share

284.4

100.0

FY'20 FY'19

10.5%

2.7%

FY20 FY19

Return on Equity

+184%

+9% +23% +72%

+202% 4x


11

Financial Performance

Strong fiscal year with Q4 generating N5.2bn PBT vs. traditional Q4 break-even/losses

CONSOLIDATED STATEMENT OF PROFIT & LOSS (N’B)

FY'20 FY'19 % Q4'20 Q4'19 %

Revenue 573.8 527.4 9% 150.3 126.8 19%

Cost of sales (508.0) (474.1) 7% (132.3) (120.0) 10%

Gross profit 65.8 53.3 23% 18.0 6.8 165%

Net operating gains and (losses) 1.9 6.5 (71%) 1.4 5.0 72%

SG&A expenses (32.6) (27.6) 18% (9.0) (6.8) 32%

Operating profit 35.1 32.3 9% 10.4 5.0 108%

Investment income 2.4 0.8 211% 1.7 0.2 750%

Finance costs (20.0) (22.9) (13%) (6.9) (6.3) 10%

Profit before taxation 17.5 10.2 72% 5.2 (1.1) -

Taxation (6.1) (6.2) (1%) (2.0) (2.8) (29%)

Profit for the year 11.4 4.0 184% 3.2 (3.9) -

Earnings Per Share (EPS) 302K 100K 202% 78.0 (95.1) -


12


Solid growth with investments in route to market

Revenue (N’b) Net finance costs & Int. coverageOPEX to Total Revenue

Source: Audited Financial Statement for the year ended 31 March 2020, FMN Analysis

• Strong revenue growth, largely driven by the upswing in volumes (+8% compared to previous year)

• Strategic investments in talent and selling expenses resulted in the uptick in OPEX ratio. However, this isexpected to drive future growth; and sales following the introduction of six new products during the year.

• Continuous balance sheet optimization resulted in a 20% drop in net finance costs and profit before tax ofN17.5b.

6.1%

4.5% 4.7% 5.2% 5.7%

Mar-16 Mar-17 Mar-18 Mar-19 Mar-20

Operating ratio

-

5.0

10.0

15.0

20.0

-

200.0

400.0

600.0


Revenue PBT


0.0x

0.5x

1.0x

1.5x

2.0x

5.0

15.0

25.0

35.0

Jan-16 Jan-17 Jan-18 Jan-19 Jan-20

Net Finance Costs Interest coverage ratio

13

Financial Position

Summary Balance Sheet

All figures in N’b Mar-20 Mar-19 %

Non-current assets 242.6 236.6 3

Current assets 189.7 180.3 5

Total assets 432.3 416.8 4

Long term debt 80.1 46.2 75

Short term debt 28.9 75.1 (62)

Other liabilities 166.9 138.9 20

Total Liabilities 276.4 265.8 6

Net Asset Value 155.9 151.0 3

5.6

3.4

2.0 2.11.6

1.41.9

0.9 0.70.5


Net Debt/EBITDA Net Debt/Equity

Leverage Ratios (x)

Debt Mix

Continued strengthening of balance sheet and improved leverage ratios

29% 21% 19%36%

74%

71% 79% 81%64%

26%


Long-term debt Short-term debt

50.9 27.2

44.1 73.5 65.9

56.3

228.9

165.3

241.6

153.2 126.9

109.6

Mar-15 Mar-16 Mar-17 Mar-18 Mar-19 Mar-20

Net working capital Borrowings

Borrowings & Net Working Capital (N’b)

Net working capital includes Inventories, receivables and payables


14


Cash and cash equivalent up 3.5x vs LY

CONSOLIDATED STATEMENT CASH FLOWS (N’B)

FY'20 FY'19 %

Cash from Operating activities 65.7 72.2 (9)

CAPEX (16.2) (26.2) (38)

Other Investing Activities 3.0 1.2 142

Cash from Investing Activities (13.2) (25.0) (47)

Net borrowings (6.6) (16.0) (59)

Other Financing activities (26.1) (26.0) 0

Cash from Financing Activities (32.7) (42.0) (22)

Net cash flow for the period 19.7 5.2 276

Cash at beginning of the period 7.5 2.3 226

Cash at the end of the period 26.2 7.5 247


15

Dividend

17% increase in proposed dividend – based on confidence in the business

• Total proposed dividend N5.7bn (2019: N4.9bn), subject to AGMratification

• Proposed dividend: N1.40 per share (2019: N1.20 per share and 2018:1.00 per share) with overall dividend increasing 17% vs 2019 and 40%vs 2018

• AGM date for approval: September 10, 2019

• Payout date if approved: September 14, 2019


16

Segment Performance04


17

Segment Financial Performance Snapshot


Profit growth driven by continuous cost efficiency in Food and turnaround of Agro-allied

SEGMENT REVENUE (N’B) SEGMENT PROFIT BEFORE TAX (N’B)

FY'20 FY'19 % FY'20 FY'19 %

Food 358.4 335.6 7 26.5 22.3 19

Agro-Allied 105.5 88.1 20 0.5 (1.0) 149

Sugar 97.6 82.7 18 5.1 7.4 (31)

Support 12.3 21.0 41 (2.6) (6.2) 58

Inter company (12.0) (12.3) 3

Total 573.8 527.4 9 17.5 10.2 72

18

Food Segment

• Accelerated B2C growth due to new product launches,expansion of production capacity and regional SKUs.

• Launched value brand products - Auntie B pasta andsemolina to ensure right regional offerings andaffordability

• Road to market strengthening and product quality focusfurther enabled revenue growth

• Border closure impact mainly seen in pasta with +20%volume growth versus last year.

Strong Q4 profit growth as Road To Market and new launches gain traction

FOOD SEGMENT

FY'20 FY'19 % Q4’20 Q4’19 %

Revenue 358.4 335.6 7 76.3 81.2 (6)

Profit before tax

26.5 22.3 19 20.0 12.0 67

16.5%

8.9%2.6%

54.9%

17.1%

Volume Mix per category – FY’20

Semovita NoodlesFlour Pasta Edible Oil and others


Lagos

AgbaraIbadan

Kano

• Northern Nigeria Flour Mills – Kano• Nigeria Eagle Flour Mills – Ibadan• Pasta Operations – Agbara• Flour Operations, Pasta Operations – Lagos• Flour Operations - Calabar

Calabar

19

Sugar Segment

SUGAR SEGMENT

FY'20 FY'19 % Q4’20 Q4’19 %

Revenue 97.6 82.7 18 30.0 23.1 30

Profit before tax

5.1 7.4 (31) (0.2) 2.8 (106)

Sunti Golden Sugar Estate LimitedGolden Sugar Company Limited

• 18.1% revenue growth driven by increase involumes

• Increase in the raw material costs and a 5%increase of the duties reduced gross profit

• Improved operational efficiency in SuntiGolden Sugar Estates by commencingmechanical harvesting, strengthening thecane haulage facilities and installing avacuum pump condenser. Resulted in 15%increased plant output.

• To increase area cultivated for sugarcaneproduction from 2,800 to 3,500 hectares

• Introduced 1.5ton Jumbo bag of sugar inSeptember 2019 and Vitamin-A FortifiedSugar in January 2020.

• Improvement in distribution channels bydeploying smaller trucks to improve deliverytime

Solid revenue growth with bottom line affected by sugar prices and duties


20.8%

21.6%55.0%

2.6%

20

Agro Allied SegmentTurns profitable following repositioning and prior year investments behindthe key value chains of Oils and Fats, Proteins and Starch

AGRO ALLIED SEGMENT

FY'20 FY'19 % Q4’20 Q4’19 %

Revenue 105.5 88.1 20 24.2 20.1 20.2

Profit before tax

0.5 (1.0) 149 0.4 2.9 (86)

Volume Mix per category –FY’20


• Revenue was driven by volume growthpredominantly in Oils and Fats (Premium Edible Oils),Proteins (Premier Feed) and Golden Fertilizer.

• Strong profit growth in Oils and Fats and Proteinswith Gross Profits more than doubling in bothsegments on an annual basis (with some IFRS9adjustments in Q4 last year).

• We continue to focus on expanding the Food divisionwith investments in Oils and Fats with new productofferings and additional capacity and to further growone of the largest Animal Feed structure in Africa

• Focus on local inputs continues through directpurchases from farmers under the commodityaggregation programme.

Premier Feeds Ltd FarmsGolden Fertilizer LtdPremium Edible Oil Ltd

LagosIjebu Ode

Ibadan

Mokwa

CalabarBenin

• Kaboji Farms (Kaboji), Sunti Golden Sugar (Mokwa), Sunflag Farms (Mokwa) – Niger State

• Shao Golden Farms - Ilorin• Premier Feed Mills, Best Chicken, Premium Edible Oil – Ibadan• Premier Feed Mills - Kaduna• Premium Cassava Products – Ijebu Ode• Golden Fertilizer, GAIL – Lagos • Agri Palm – Benin• Eastern Premier Feed Mills – Calabar

Ilorin

Kaduna

Kaboji

21

Rebranding of subsidiaries

Continued brand revitalization strategy for some Agro-Allied entities

We REBRANDED

We’re Now Known As…


22

Support Segment

SUPPORT SEGMENT

FY'20 FY'19 % Q4’20 Q4’19 %

Revenue 12.3 21.0 (41) (0.2) 2.5 (107)

Profit before tax

(2.6) (6.2) 58 2.2 (6.4) 135

Revenue Mix per category – FY’20

• Lower gross profit in Bagco largely due to competitivemarket. However, very well positioned to meet localdemand with lower importation levels of packagingmaterials going forward

• Bagco introduced an innovative high premium product- Tubed Sac with three variants – “Glued Tubed sacwith inner liner”, “Laminated Tubed Sac”, “LaminatedTubed Sac with block bottom”.

• Changes such as ABTL’s “open storage initiative” toturn idle space to storage areas contributed toimproving operational margins in the ABTL business.

Improved efficiency drives better profits

76.5%

13.0%

10.4%

BAGCO GTCABTL & Golden Shipping


Corporate Social Responsibility

1500Projects total

Sponsored skills acquisition programs Supporting local schools across the country

Donating about N2bn for COVID-19 relief Raising awareness on World Aids Day

We continue to support key projects and invest in our communities

Education, research and skills development Environmental sustainability

Infrastructural development Health, safety and welfare

Infrastructural development


24

FMN in Action - Response to COVID-19

• CBN and other institutions extendedpalliatives to cushion the adverseeconomic impact of COVID-19

• Donated about N2bn for COVID-19relief:

• $1.5m worth of medical suppliesincluding test kits, ventilatorsand personal protectiveequipment (PPE) to facilitateincrease in testing capacity

• Donated about N1bn to theCoalition Against COVID-19(CACOVID) and N0.4bn ofGolden Penny products to 12state governments

• Minimal disruptions to ouroperations, as the Group is providingan essential service

• Implemented measures to ensure thehighest safety and health standardsare in place to ensure guaranteedproduction and supply of safe andnutritious food products

• Farms, processing factories anddistribution channels open andoperating safely

• Implemented a business continuityplan to mitigate disruptions tooperations

Managing through the pandemic


25

FMN in Action - Response to COVID-19

Supporting relief efforts by the government and related agencies


Donations for food and medical supplies (ventilators, test kits & PPEs)

26

Business Outlook05


27

Outlook

• Continue to Feed the Nation Everyday with focus on local content and value add

• Committed execution of the turnaround strategy for Agro-Allied Division withthe aim of ensuring profitability and improving local content in the group’sproduct portfolio

• Remain focused on increasing operational efficiency with accelerated plans forcost optimizations across the group to ensure profitability in the new operatingenvironment

• Expand capability of the edible oil refinery to meet up with new productsdevelopment in line with our long-term strategy to stimulate organic growthand grow the reach of our animal feed products

• Accelerate expansion in B2C segment with multiple product offerings across ourfive key value chains: grains; oils & fats; sugar; feeds & proteins, and cassavastarch

• Pursue new areas of demand across the group during and post COVID-19


28

Appendix 06


29

Financial Summary

Financial Performance (N’b)

for the year ended 31st Mar-20 Mar-19 Mar-18 Mar-17 Mar-16

Revenue 573.8 527.4 542.7 524.4 342.5

Cost of sales (508.0) (474.1) (473.9) (457.7) (304.9)

Gross profit 65.8 53.3 68.8 66.7 37.6

Operating expenses (32.6) (27.5) (26.3) (25.3) (28.5)

Operating income 1.9 6.5 5.9 - -

Operating profit 35.1 32.3 48.4 41.4 9.1

Investment income 2.4 0.8 0.8 1.6 24.8

Finance costs (20.0) (22.9) (32.7) (32.5) (22.4)

Profit before tax 17.5 10.2 16.5 10.5 11.5


30

Financial Summary


Financial Position (N’b)as at 31st Mar-20 Mar-19 Mar-18 Mar-17 Mar-16ASSETS

Non-current assets 242.6 236.5 234.1 227.7 220.6

Current assets 189.7 180.3 174.2 254.8 124.6

Total assets 432.3 416.8 408.3 482.6 345.3

LIABILITIES

Non-current liabilities 127.9 81.2 57.9 72.5 66.5

Current liabilities 148.6 184.6 199.7 307.4 183.0

Total liabilities 276.5 265.8 257.7 380.0 249.5

Total equity 155.8 150.9 150.6 102.5 95.7

Total equity and liabilities 432.3 416.8 408.3 482.6 345.3

Long term borrowings 80.7 46.2 29.3 50.8 48.0.

Short term borrowings 23.3 71.0 103.9 141.7 100.8

Bank overdraft 5.5 9.7 19.9 49.0 16.4

Other non-current liabilities 47.3 35.0 28.5 21.6 18.5

Other current liabilities 119.7 107.4 75.9 116.7 65.7

31

Disclaimer

This presentation contains forward-looking statements with regard to the financial position andresults of the activities of Flour Mills of Nigeria Plc (“FMN Plc”). These forward-looking statementsare subject to risks and uncertainties that could cause actual results to differ materially from thoseexpressed in the forward-looking statements.

Many of these risks and uncertainties relate to factors that are beyond FMN Plc’s ability to controlor estimate precisely, such as future market and economic conditions, the behaviour of othermarket participants, changes in consumer preferences, costs of raw materials, interest rate andforeign exchange fluctuations, change in tax rates, changes in law, changes in pension costs, theactions of government regulators and weather conditions.

You are cautioned not to place undue reliance on these forward-looking statements, which speakonly as of the date of this presentation. FMN Plc does not undertake any obligation to publiclyrelease any revisions to these forward-looking statements to reflect events or circumstances afterthe date of these materials.

Market share estimates contained in this presentation are based on outside sources incombination with management estimates.


FLOUR MILLS OF NIGERIA PLC | FULL YEAR GROUP RESULTS PRESENTATION TO INVESTORS & ANALYSTS 32

Documents

FLOUR MILLS OF NIGERIA PLC | FULL YEAR MARCH 2020 GROUP ... Reports 2020/Full year FY20... · • Border closure impact mainly seen in pasta with +20% volume growth versus last year