BEHIND FLOWERS OF FLOUR MILLS

Flour Mills of Nigeria's nine months figures to December 2015 released recently inadvertently indicates mounting profit before tax but there is a little more behind the flowers.
The truth actually is that Flour Mills of Nigeria reported profit because of bountiful gains from disposal of investment in associate.
Decoded: This is more of a capital gain unlike annual share of profit or loss from investments
According to the figures, the gain from the disposal was N23732.5m out of it N13952m was from investment disposed of by the company as against the group.
Now, from the same figures gross profit increased marginally to N27683.9m from N24930m as 7.94% rise in core revenue to N263680m from N244280m was accompanied by 7.59% increase in cost of sale to N235996.1m from N219350.8m.
Subsequently, from the same figures, total overhead including net finance cost came to N31630.8m meaning a loss was on the card for the nine months.
That did not come into being because of the investment disposal gain leading to N19785.6m profit before tax for the period compared to N3696.6m in nine months to December 2014.
There are less worrisome deductions from the figures though. For example there was 14.2% decrease in selling and distribution costs to N3984.3m from N4644m previously in spite of the core revenue increase.
Less so but equally noteworthy was the 1.13% drop in administration cost to N8088.5m from N8181m.
It then appears that the real headache Flour Mills has is its huge finance charges bill. This was N17395.7m within the nine months under review, up 13.4% from N15339.8m.
Perhaps this was a major reason behind the decision to divest that led to the capital gain but the problem remains.
Yes, overdraft declined by 59.7% to N24068.3m within the period but short term loans increased by 45.9% to N79141.8m and longer term loan also rose by 12.2% to N61988.6m.
Yes too, Flour Mills working capital deficit narrowed from N55609.8m to N39644.7m but it is still a huge gap.
SO:
* One can see flowers in Flour Mills of Nigeria finding hard to remain beautiful so long as the huge appetite for loans persists.
* Thus in the near future liquidity management may remain a major task.

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